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Keeping up with the Joneses by finding a better-paid job - The effect of relative income on job mobility

Author

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  • Kronenberg, Kristin
  • Kronenberg, Tobias

Abstract

It has been shown that a person’s relative income – compared to a reference group – has a negative impact on self-reported happiness. This suggests that people who aim at increasing their happiness should try to find a better-paid job if their relative income is low. In this paper we study this hypothesis by estimating the effect of relative income on job mobility, using a dataset containing information on roughly four million Dutch employees. We consider three different reference groups: people who live in the same neighborhood, people who work for the same employer, and people who share certain demographic characteristics. Our findings suggest that workers compare their own income to that of their neighbors, and low relative income is associated with higher job mobility. We conclude that low relative income (compared to the neighbors) reduces workers’ happiness, and workers react to this by finding a new job which may offer the prospect of higher pay.

Suggested Citation

  • Kronenberg, Kristin & Kronenberg, Tobias, 2011. "Keeping up with the Joneses by finding a better-paid job - The effect of relative income on job mobility," MPRA Paper 29426, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:29426
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    References listed on IDEAS

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    1. Thorstein Veblen, 1899. "Mr. Cummings's Strictures on "The Theory of the Leisure Class"," Journal of Political Economy, University of Chicago Press, vol. 8, pages 106-106.
    2. Linneman, Peter & Graves, Philip E., 1983. "Migration and job change: A multinomial logit approach," Journal of Urban Economics, Elsevier, vol. 14(3), pages 263-279, November.
    3. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 963-1002.
    4. Clark, Andrew E. & Oswald, Andrew J., 1996. "Satisfaction and comparison income," Journal of Public Economics, Elsevier, vol. 61(3), pages 359-381, September.
    5. Becker, Gary S, 1981. "Altruism in the Family and Selfishness in the Market Place," Economica, London School of Economics and Political Science, vol. 48(189), pages 1-15, February.
    6. Andrew E. Clark & Nicolai Kristensen & Niels Westergård-Nielsen, 2009. "Economic Satisfaction and Income Rank in Small Neighbourhoods," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 519-527, 04-05.
    7. Veblen, Thorstein, 2009. "The Theory of the Leisure Class," OUP Catalogue, Oxford University Press, number 9780199552580 edited by Banta, Martha.
    8. Veblen, Thorstein, 1899. "The Theory of the Leisure Class," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number veblen1899.
    9. Bergin, Adele, 2009. "Job Mobility in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 40(1), pages 15-47.
    10. repec:pse:psecon:2008-44 is not listed on IDEAS
    11. 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.
    12. Kronenberg, Kristin & Carree, Martin, 2010. "Job and residential mobility in the Netherlands: the influence of human capital, household composition and location," MPRA Paper 25840, University Library of Munich, Germany.
    13. Andrew E. Clark & Nicolai Kristensen & Niels Westergård-Nielsen, 2008. "Economic satisfaction and income rank in small neighbourhoods," Working Papers halshs-00586254, HAL.
    14. Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 997-1019, June.
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    Cited by:

    1. Battisti, Michele, 2017. "High wage workers and high wage peers," Labour Economics, Elsevier, vol. 46(C), pages 47-63.
    2. Stefan Jestl & Mathias Moser & Anna K. Raggl, 2017. "Can’t Keep Up with the Joneses: How Relative Deprivation Pushes Internal Migration in Austria," wiiw Working Papers 137, The Vienna Institute for International Economic Studies, wiiw.

    More about this item

    Keywords

    Relative income; job mobility; happiness; social status;

    JEL classification:

    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • D10 - Microeconomics - - Household Behavior - - - General
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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