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Empathy and Emulation: Life Satisfaction and the Urban Geography of Comparison Groups

  • Christopher P. Barrington-Leigh
  • John F. Helliwell

Departures from self-centred, consumption-oriented decision making are increasingly common in economic theory and are well motivated by a wide range of behavioural data from experiments, surveys, and econometric inference. A number of studies have shown large negative externalities in individual subjective well-being due to neighbours' incomes. These reflect the role of nearby households as comparison groups acting in individuals' reference-dependent preferences over income or consumption. At the same time, there are many reasons to expect positive spillovers from having prosperous neighbours. We combine high-resolution geographic data from three Canada-wide social surveys and the 2001 census to disentangle the spatial pattern of reference groups in urban areas and to identify channels of positive and negative spillovers on life satisfaction. We find evidence of significant effects of others' income at different scales and are able to reject a number of alternative explanations for the findings.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14593.

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Date of creation: Dec 2008
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Handle: RePEc:nbr:nberwo:14593
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  7. Armin Falk & Markus Knell, 2004. "Choosing the Joneses: Endogenous Goals and Reference Standards," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(3), pages 417-435, October.
  8. Bertrand, Marianne & Shafir, Eldar & Mullainathan, Sendhil, 2006. "Behavioral Economics and Marketing in Aid of Decision Making Among the Poor," Scholarly Articles 2962609, Harvard University Department of Economics.
  9. George Loewenstein & Ted O'Donoghue & Matthew Rabin, 2001. "Projection Bias in Predicting Future Utility," General Economics and Teaching 0012003, EconWPA.
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  12. Krueger, Alan B. & Schkade, David A., 2008. "The reliability of subjective well-being measures," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1833-1845, August.
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  14. 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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  16. John Knight & Lina Song, 2007. "Subjective Well-being and its Determinants in Rural China," Economics Series Working Papers 334, University of Oxford, Department of Economics.
  17. Barrington-Leigh, Christopher P, 2008. "Weather as a transient influence on survey-reported satisfaction with life," MPRA Paper 25736, University Library of Munich, Germany.
  18. Alpizar, Francisco & Carlsson, Fredrik & Johansson-Stenman, Olof, 2005. "How much do we care about absolute versus relative income and consumption?," Journal of Economic Behavior & Organization, Elsevier, vol. 56(3), pages 405-421, March.
  19. Jacob L. Vigdor, 2006. "Fifty Million Voters Can't Be Wrong: Economic Self-Interest and Redistributive Politics," NBER Working Papers 12371, National Bureau of Economic Research, Inc.
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