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Who are the Joneses that You are Keeping up with? A Study about how Reference Groups are Determined

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  • Mengyuan Zhou

    (Graduate School of Economics, Keio University)

Abstract

This study empirically investigates who is chosen as the reference group in the standard of living comparison and how it is chosen in Japan and the United States. The results show that majority people will compare to their neighbor instead of the average people in the nation (which is often assumed in the macro and finance literature), colleagues or friends (reference groups in income comparison) in both countries. This paper suggests that people may use the routine standards when facing the selection of reference groups in relative standard of living. In addition, this paper tests the influence of reference group itself on the standard of living. The result unveils that those who compare to their neighbor will rate the relative standard of living higher than the others.

Suggested Citation

  • Mengyuan Zhou, 2018. "Who are the Joneses that You are Keeping up with? A Study about how Reference Groups are Determined," Keio-IES Discussion Paper Series 2018-001, Institute for Economics Studies, Keio University.
    • Handle: RePEc:keo:dpaper:2018-001
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    More about this item

    Keywords

    reference groups; relative standard of living; routine standards;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • D00 - Microeconomics - - General - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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