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Direct Evidence on Income Comparisons and their Welfare Effects

  • Senik, Claudia

    ()

    (Paris School of Economics)

This paper provides unheard direct evidence that comparisons exert a significant effect on subjective well-being. It also evaluates the relative importance of different types of benchmarks. Dynamic comparisons outweigh static ones. Internal benchmarks are more important than external reference groups. Local comparisons (to parents, former colleagues or school classmates) are more powerful than general comparisons such as my rank in the social ladder. The most important impact comes from the deterioration of my living standard and from under-performing my former schoolmates or colleagues. A possible interpretation is that comparisons benchmarks are all the more significant as they are interpreted in terms of seized or lost opportunities.

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File URL: http://ftp.iza.org/dp3195.pdf
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3195.

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Length: 48 pages
Date of creation: Nov 2007
Date of revision:
Publication status: published in: Journal of Economic Behavior and Organization, 2009, 72 (1), 408-424
Handle: RePEc:iza:izadps:dp3195
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  24. Van Praag, Bernard M. S. & Kapteyn, Arie, 1973. "Further evidence on the individual welfare function of income: An empirical investigatiion in The Netherlands," European Economic Review, Elsevier, vol. 4(1), pages 33-62, April.
  25. Van Praag, Bernard, 1971. "The welfare function of income in Belgium: An empirical investigation," European Economic Review, Elsevier, vol. 2(3), pages 337-369.
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  36. repec:ner:tilbur:urn:nbn:nl:ui:12-3508638 is not listed on IDEAS
  37. Rafael Di Tella & Robert MacCulloch, 2006. "Some Uses of Happiness Data in Economics," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 25-46, Winter.
  38. McBride, Michael, 2001. "Relative-income effects on subjective well-being in the cross-section," Journal of Economic Behavior & Organization, Elsevier, vol. 45(3), pages 251-278, July.
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