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

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  • Kristin Kronenberg
  • Tobias Kronenberg

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

  • Kristin Kronenberg & Tobias Kronenberg, 2011. "Keeping up with the Joneses by finding a better-paid job - The effect of relative income on job mobility," ERSA conference papers ersa11p1445, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa11p1445
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    References listed on IDEAS

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    1. 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.
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    7. 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.
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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 Katharina Raggl, 2021. "Cannot keep up with the Joneses: how relative deprivation pushes internal migration in Austria," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 49(2), pages 210-231, November.

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    More about this item

    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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