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Absolute vs Relative Income and Life Satisfaction

Author

Listed:
  • Rickardsson, Jonna

    () (Jönköping International Business School (JIBS))

  • Mellander, Charlotta

    () (Jönköping International Business School (JIBS) & Centre of Excellence for Science and Innovation Studies (CESIS))

Abstract

This paper examines whether subjective life-satisfaction is most strongly related to absolute or relative income in terms of either proximal neighbors or a wider aggregated region. The analysis utilizes two unique datasets - survey data on happiness in combination with fine-level income data for postal codes and municipalities. We find a significant relationship between happiness and both personal income and relative income position among nearby neighbors and more remote neighbors. Hence, being rich as well as being richer than others in the area increases the likelihood of being more satisfied with life. Above all, we find individuals’ level of life-satisfaction to be more strongly related to the income of people in the larger municipality than to the income of nearby neighbors.

Suggested Citation

  • Rickardsson, Jonna & Mellander, Charlotta, 2017. "Absolute vs Relative Income and Life Satisfaction," Working Paper Series in Economics and Institutions of Innovation 451, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  • Handle: RePEc:hhs:cesisp:0451
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    File URL: https://static.sys.kth.se/itm/wp/cesis/cesiswp451.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Life-satisfaction; Happiness; Subjective well-being; Absolute income; Relative income;

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • P46 - Economic Systems - - Other Economic Systems - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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