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Misery Loves Company : Exogenous Shocks in Retirement Expectations and Social Comparison Effects on Subjective Well-Being

  • Montizaan Raymond
  • Vendrik Maarten

    (METEOR)

This study investigates the effects of social comparisons accompanying a substantial reform of theDutch pension system on the job satisfaction of workers who are close to retirement. The reformimplies that public sector workers born on January 1, 1950, or later face a substantial reductionin their pension rights, while workers born before this threshold date can still retire under theold, more generous rules. Using unique matched survey and administrative panel data on male publicsector workers born in 1949 and 1950, we find strong and persistent effects on job satisfactionthat are sizable compared to income effects on well-being. The drop in satisfaction is stronglyaffected by social comparisons with colleagues. Treated workers are less affected by the reformwhen the treatment group is larger in the organization where they are employed. Moreover, thesocial comparison effect is especially prevalent in organizations that stimulate their employeesto work in teams. We also find evidence that workers compare their own replacement rate with theaveragereplacement of comparable individuals in their organization, but the major part of the socialcomparison effect is non-monetary.

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Paper provided by Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) in its series Research Memorandum with number 049.

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Date of creation: 2012
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Handle: RePEc:unm:umamet:2012049
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