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Choosing Your Pond: Location Choices and Relative Income

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  • Nicolas L. Bottan
  • Ricardo Perez-Truglia

Abstract

Do individuals care about their relative income? While this is a long-standing hypothesis, revealed-preference evidence remains elusive. We provide a unique test by studying residential choices: individuals often must choose between places with different income distributions, and as a result they “choose” their relative income. We conducted a field experiment with 1,080 senior medical students who participated in the National Resident Matching Program. We estimate their preferences by combining choice data, survey data on perceptions and information-provision experiments. The evidence suggests that individuals care about their relative income and that these preferences differ across single and non-single individuals.

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  • Nicolas L. Bottan & Ricardo Perez-Truglia, 2017. "Choosing Your Pond: Location Choices and Relative Income," NBER Working Papers 23615, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:23615
    Note: PE POL
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    Cited by:

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    2. Blesse, Sebastian & Lergetporer, Philipp & Nover, Justus & Werner, Katharina, 2023. "Transparency and policy competition: Experimental evidence from German citizens and politicians," ZEW Discussion Papers 23-007, ZEW - Leibniz Centre for European Economic Research.
    3. Hermle, Johannes & Herold, Elena & Hildebrand, Nikolaus, 2024. "Preferences over Relative Income within the Household," IZA Discussion Papers 16803, Institute of Labor Economics (IZA).
    4. Brad C. Nathan & Ricardo Perez-Truglia & Alejandro Zentner, 2020. "My Taxes are Too Darn High: Why Do Households Protest their Taxes?," NBER Working Papers 27816, National Bureau of Economic Research, Inc.
    5. Sonja Settele, 2019. "How Do Beliefs about the Gender Wage Gap Affect the Demand for Public Policy?," CEBI working paper series 19-13, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    6. Pinar Yildirim & Andrei Simonov & Maria Petrova & Ricardo Perez-Truglia, 2020. "Are Political and Charitable Giving Substitutes? Evidence from the United States," NBER Working Papers 26616, National Bureau of Economic Research, Inc.
    7. Jere R. Behrman & Flávio Cunha & Esteban Puentes & Fan Wang, 2018. "You Are What Your Parents Expect: Height and Local Reference Points," PIER Working Paper Archive 18-007, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Apr 2022.
    8. Lasse J. Jessen & Sebastian Koehne & Patrick Nüß & Jens Ruhose, 2024. "Socioeconomic Inequality in Life Expectancy: Perception and Policy Demand," CESifo Working Paper Series 10940, CESifo.
    9. J. Atsu Amegashie, 2024. "The Importance of Social Status in a Rent-Seeking Society," CESifo Working Paper Series 10894, CESifo.
    10. Staab, Manuel, 2019. "The Formation of Social Groups under Status Concern," MPRA Paper 97114, University Library of Munich, Germany.
    11. Akay, Alpaslan & Martinsson, Peter, 2019. "Positional concerns through the life-cycle," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 78(C), pages 98-103.
    12. Nicolas L. Bottan & Ricardo Perez-Truglia, 2020. "Betting on the House: Subjective Expectations and Market Choices," NBER Working Papers 27412, National Bureau of Economic Research, Inc.
    13. Dietmar Fehr & Johanna Mollerstrom & Ricardo Perez-Truglia, 2022. "Your Place in the World: Relative Income and Global Inequality," American Economic Journal: Economic Policy, American Economic Association, vol. 14(4), pages 232-268, November.
    14. Marcelo Bergolo & Rodrigo Ceni & Guillermo Cruces & Matias Giaccobasso & Ricardo Perez-Truglia, 2023. "Tax Audits as Scarecrows: Evidence from a Large-Scale Field Experiment," American Economic Journal: Economic Policy, American Economic Association, vol. 15(1), pages 110-153, February.

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    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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