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Misery loves company: Exogenous shocks in retirement expectations and social comparison effects on subjective well-being

  • Montizaan Raymond
  • Vendrik Maarten

    (ROA rm)

This study investigates the effects of social comparisons accompanying a substantialreform of the Dutch pension system on the job satisfaction of workers who are close toretirement. The reform implies that public sector workers born on January 1, 1950, orlater face a substantial reduction in their pension rights, while workers born before thisthreshold date can still retire under the old, more generous rules. Using unique matchedsurvey and administrative panel data on male public sector workers born in 1949 and1950, we find strong and persistent effects on job satisfaction that are sizable comparedto income effects on well-being. The drop in satisfaction is strongly affected by socialcomparisons with colleagues. Treated workers are less affected by the reform when thetreatment group is larger in the organization where they are employed. Moreover, thesocial comparison effect is especially prevalent in organizations that stimulate theiremployees to work in teams. We also find evidence that workers compare their ownreplacement rate with the average replacement of comparable individuals in theirorganization, but the major part of the social comparison effect is non-monetary.

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Paper provided by Maastricht University, Research Centre for Education and the Labour Market (ROA) in its series ROA Research Memorandum with number 013.

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Date of creation: 2012
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Handle: RePEc:unm:umaror:2012013
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