Stick and Stay, Make it Pay? Time Preferences and Marginal (Dis)Utility of Relative Concerns

Individuals’ time preferences may shape how they respond to increases in the income of comparable others. We argue that others’ higher income generates stronger disutility among impatient individuals, who seek immediate gratification, whereas patient individuals may experience lower disutility, or even utility, if they view income gaps as informative signals for future income growth and catching up. Using long-run panel data from the Socio-Economic Panel (SOEP), we examine whether patience moderates the relationship between relative income and life satisfaction. Fixed effects interaction models provide consistent evidence that the well-known disutility from relative income, often interpreted as a status effect, is mainly concentrated among impatient individuals with higher discount rates. By contrast, patient individuals, characterized by lower discount rates, stronger self-control, and better regulation of stress and anxiety, experience weaker disutility or even positive utility from others’ income, consistent with an information effect. The findings are robust to alternative income measures, savings, reference groups, and incentivised measures of time preferences. We discuss implications for behavioural and welfare economics