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Local Neighbors as Positives, Regional Neighbors as Negatives: Competing Channels in the Relationship between Others' Income, Health, and Happiness

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  • Ifcher, John

    () (Santa Clara University)

  • Zarghamee, Homa

    () (Barnard College)

  • Graham, Carol Lee

    () (Brookings Institution)

Abstract

We develop a theoretical framework that integrates four distinct channels through which others' income can affect utility: public goods, cost of living, expectations of future income, and direct effects (relative income hypothesis and/or altruism). We empirically estimate the relationship with U.S. well-being and health data from Gallup and geographically-based median-income data for ZIP codes and MSAs. The relationship is proximity-dependent: positive (negative) with ZIP-code (MSA) median income as reference income, suggesting that positive (negative) channels dominate locally (regionally) and reconciling seemingly divergent results from the literature. Additional analyses provide evidence of the importance of the public-goods and cost-of-living channels.

Suggested Citation

  • Ifcher, John & Zarghamee, Homa & Graham, Carol Lee, 2016. "Local Neighbors as Positives, Regional Neighbors as Negatives: Competing Channels in the Relationship between Others' Income, Health, and Happiness," IZA Discussion Papers 9934, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp9934
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    References listed on IDEAS

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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Local Neighbors as Positives, Regional Neighbors as Negatives: Competing Channels in the Relationship between Others’ Income, Health, and Happiness
      by maximorossi in NEP-LTV blog on 2016-07-01 19:52:29

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    Cited by:

    1. John Ifcher & Homa Zarghamee & Carol Graham, 2019. "Income inequality and well-being in the U.S.: evidence of geographic-scale- and measure-dependence," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 17(3), pages 415-434, September.
    2. Zokaei Ashtiani, Amin & Dudek, Thomas & Rieger, Marc Oliver, 2020. "Happy savers and happy spenders: An experimental study comparing US Americans and Germans," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 85(C).
    3. Jean-Marc Bédhat Atsebi & Ada Ferrer-i-Carbonell, 2019. "Relative Deprivation in Tanzania," Working Papers 1124, Barcelona Graduate School of Economics.

    More about this item

    Keywords

    relative utility; reference group; others' income; relative income hypothesis; subjective well-being; income comparison; happiness;

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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