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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.

Suggested Citation

  • 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
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    Cited by:

    1. Dietmar Fehr & Johanna Mollerstrom & Ricardo Perez-Truglia, 2019. "Your Place in the World: The Demand for National and Global Redistribution," NBER Working Papers 26555, National Bureau of Economic Research, Inc.
    2. Marcelo L. Bérgolo & Rodrigo Ceni & Guillermo Cruces & Matias Giaccobasso & Ricardo Perez-Truglia, 2017. "Tax Audits as Scarecrows: Evidence from a Large-Scale Field Experiment," NBER Working Papers 23631, National Bureau of Economic Research, Inc.
    3. Ricardo Perez-Truglia, 2020. "The Effects of Income Transparency on Well-Being: Evidence from a Natural Experiment," American Economic Review, American Economic Association, vol. 110(4), pages 1019-1054, April.
    4. Brad C. Nathan & Ricardo Perez-Truglia & Alejandro Zentner, 2020. "My Taxes are Too Darn High: Tax Protests as Revealed Preferences for Redistribution," 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. Jere R. Behrman & Flávio Cunha & Esteban Puentes & Fan Wang, 2018. "You Are What Your Parents Think: Height and Local Reference Points," PIER Working Paper Archive 18-007, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 22 Apr 2018.
    7. Staab, Manuel, 2019. "The Formation of Social Groups under Status Concern," MPRA Paper 97114, University Library of Munich, Germany.
    8. 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.
    9. 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.

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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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