Taking pleasure from neighbours’ misfortune: Comparison effects, social norms and the well-being of the unemployed

The role of relative rank, or interdependent preferences, in explaining individual well-being is a rapidly emerging research area for economists. A typically overlooked issue in this literature is the extent of individual heterogeneity in the degree to which individuals are susceptible to comparison effects. In keeping with the idea that comparison effects are important in the labour market, we find that the well-being of the unemployed is positively correlated with the unemployment of others (neighbourhood unemployment rates), whereas the opposite is true for the population as a whole. The main novelty of this study is that we document significant individual heterogeneity in these effects. Specifically, unemployed males and those with relatively strong social ties in their neighbourhood appear to be much more likely to derive well-being benefits from the unemployment of others. We further show that there are significant differences according to personality traits. We suggest that neglecting to consider individual heterogeneity and focusing on ‘average’ effects as is the norm in the literature to date will invariably lead to an incomplete, and perhaps superficial, understanding of the role of comparison effects for individual well-being.