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The Easterlin Paradox and Another Anatomy of Income Comparisons: Evidence from Hypothetical Choice Experiments

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  • Katsunori Yamada
  • Masayuki Sato

Abstract

This paper provides evidence from Internet-based, large-scale survey data of hypothetical choice experiment on the relative utility hypothesis. The methodology exploited here complements previous empirical results from happiness studies, incentivized choice experiment studies, and neuroscience studies in sucha way that methodological problems among previous studies within these fields are resolved. We show that not only the intensity but also the distribution of relative utility are different across specific comparison benchmarks (internal reference group), and across types of reference groups people are facing in the experiments (external reference group). The relative utility effect among Japanese respondents, while shown to exist in the form of jealousy, is found to be not as strong as can validate the Easterlin paradox. Comparison benchmark with daily contacts is related to stronger jealousy. We also provide empirical evidence, which nuances that the reference group is chosen endogenously.

Suggested Citation

  • Katsunori Yamada & Masayuki Sato, 2010. "The Easterlin Paradox and Another Anatomy of Income Comparisons: Evidence from Hypothetical Choice Experiments," ISER Discussion Paper 0795, Institute of Social and Economic Research, The University of Osaka.
  • Handle: RePEc:dpr:wpaper:0795
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    Cited by:

    1. Thomas Aronsson & Sugata Ghosh & Ronald Wendner, 2023. "Positional preferences and efficiency in a dynamic economy," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 61(2), pages 311-337, August.
    2. Dufhues, Thomas & Möllers, Judith & Jantsch, Antje & Buchenrieder, Gertrud & Camfield, Laura, 2023. "Don’t look up! Individual income comparisons and subjective well-being of students in Thailand," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 24(2), pages 477-503.
    3. Yoshiyasu Ono & Katsunori Yamada, 2018. "Difference or Ratio: Implications of Status Preference on Stagnation," Australian Economic Papers, Wiley Blackwell, vol. 57(3), pages 346-362, September.
    4. Lea S. Svenningsen, 2019. "Social preferences for distributive outcomes of climate policy," Climatic Change, Springer, vol. 157(2), pages 319-336, November.
    5. Shigeoka, Hitoshi & Yamada, Katsunori, 2019. "Income-comparison attitudes in the United States and the United Kingdom: Evidence from discrete-choice experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 164(C), pages 414-438.
    6. Clark, Andrew E. & D'Ambrosio, Conchita, 2014. "Attitudes to Income Inequality: Experimental and Survey Evidence," IZA Discussion Papers 8136, Institute of Labor Economics (IZA).
    7. Nicolas L. Bottan & Ricardo Perez-Truglia, 2022. "Choosing Your Pond: Location Choices and Relative Income," The Review of Economics and Statistics, MIT Press, vol. 104(5), pages 1010-1027, December.
    8. Ricardo Perez-Truglia, 2020. "The Effects of Income Transparency on Well-Being: Evidence from a Natural Experiment," American Economic Review, American Economic Association, vol. 110(4), pages 1019-1054, April.
    9. Laszlo Goerke & Michael Neugart, 2021. "Social preferences, monopsony and government intervention," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(2), pages 864-891, May.
    10. Eiji Yamamura, 2021. "Where do I rank? Am I happy?: learning income position and subjective-wellbeing in an internet experiment," Papers 2107.11185, arXiv.org.
    11. Atalay, Kadir & Bakhtiar, Fayzan & Cheung, Stephen & Slonim, Robert, 2014. "Savings and prize-linked savings accounts," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 86-106.
    12. Clark, Andrew E. & Senik, Claudia & Yamada, Katsunori, 2017. "When experienced and decision utility concur: The case of income comparisons," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 70(C), pages 1-9.
    13. Kim, Hisam & Ohtake, Fumio, 2014. "Status Race and Happiness: What Experimental Surveys Tell Us," KDI Policy Studies 2014-01, Korea Development Institute (KDI).
    14. Yamada Katsunori & Sannabe Atsushi & Mastrobuoni Giovanni & De la Garza Adrián, 2010. "The Relative Utility Hypothesis With and Without Self-reported Reference Wages," Working Papers 2010-19, Banco de México.
    15. Arthur Lewbel & Samuel Norris & Krishna Pendakur & Xi Qu, 2022. "Consumption peer effects and utility needs in India," Quantitative Economics, Econometric Society, vol. 13(3), pages 1257-1295, July.
    16. Andrew E. Clark & Claudia Senik & Katsunori Yamada, 2022. "The Joneses in Japan: income comparisons and financial satisfaction," The Japanese Economic Review, Springer, vol. 73(2), pages 351-372, April.
    17. Lea Skræp Svenningsen, 2017. "Distributive outcomes matter: Measuring social preferences for climate policy," IFRO Working Paper 2017/11, University of Copenhagen, Department of Food and Resource Economics.
    18. Tim Friehe & Mario Mechtel & Markus Pannenberg, 2014. "Positional Income Concerns: Prevalence and Relationship with Personality and Economic Preferences," IAAEU Discussion Papers 201411, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    19. Sun Youn Lee & Fumio Ohtake, 2021. "How Conscious Are You of Others? Further Evidence on Relative Income and Happiness," Journal of Happiness Studies, Springer, vol. 22(8), pages 3321-3356, December.
    20. Seeun Jung & Yasuhiro Nakamoto, & Masayuki Sato & Katsunori Yamada, 2014. "Misperception of Consumption: Evidence from a Choice Experiment," THEMA Working Papers 2014-23, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    21. Yoshiyasu Ono & Katsunori Yamada, 2012. "Difference or Ratio: Implication of Status Preference on Stagnation," ISER Discussion Paper 0856, Institute of Social and Economic Research, The University of Osaka.
    22. Mengyuan Zhou, 2018. "Who are the Joneses You are Keeping up with?," Economics Bulletin, AccessEcon, vol. 38(3), pages 1261-1266.
    23. Antje Jantsch & Gertrud Buchenrieder & Thomas Dufhues & Judith Möllers, 2024. "Social Comparisons Under Pandemic Stress: Income Reference Groups, Comparison Patterns, and the Subjective Well-Being of German Students," Journal of Happiness Studies, Springer, vol. 25(7), pages 1-24, October.
    24. Adalgiso Amendola & Roberto Dell’Anno & Lavinia Parisi, 2019. "Happiness and inequality in European countries: is it a matter of peer group comparisons?," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 36(2), pages 473-508, July.

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