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Keeping up with the Joneses: Income Comparisons and Labour Supply

  • Goerke, Laszlo
  • Pannenberg, Markus

We investigate whether working time is related to the intensity of income comparisons and relative income. Our simple theoretical model demonstrates that the effects of relative income concerns depend on whether an individual can choose contractual working hours and/or overtime. In the empirical analysis we rely on novel data from the German Socio-Economic Panel (SOEP), which contains direct information on comparison intensity and perceived relative income with respect to predetermined reference groups. In line with our theoretical model we find that overtime rises with the intensity with which respondents compare their income to that of other individuals of the same occupation and that overtime declines with perceived relative income. This is consistent with 'Keeping up with the Joneses' preferences.

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File URL: http://econstor.eu/bitstream/10419/80033/1/VfS_2013_pid_221.pdf
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Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 80033.

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Date of creation: 2013
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Handle: RePEc:zbw:vfsc13:80033
Contact details of provider: Web page: http://www.socialpolitik.org/
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  1. 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.
  2. Falk, Armin & Knell, Markus, 2004. "Choosing the Joneses: Endogenous Goals and Reference Standards," IZA Discussion Papers 1152, Institute for the Study of Labor (IZA).
  3. Aronsson, Thomas & Johansson-Stenman, Olof, 2009. "Conspicuous Leisure: Optimal Income Taxation when both Relative Consumption and Relative Leisure Matter," Working Papers in Economics 358, University of Gothenburg, Department of Economics.
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  6. Yongjin Park, 2005. "The Second Paycheck to Keep Up With the Joneses: Relative Income Concerns and Labor Market Decisions of Married Women," UMASS Amherst Economics Working Papers 2005-10, University of Massachusetts Amherst, Department of Economics.
  7. Mui, V.L., 1992. "The Economics of Envy," Papers 9306, Southern California - Department of Economics.
  8. KNIGHT, John & SONG, Lina & GUNATILAKA, Ramani, 2009. "Subjective well-being and its determinants in rural China," China Economic Review, Elsevier, vol. 20(4), pages 635-649, December.
  9. Clark, Andrew E. & Frijters, Paul & Shields, Michael A., 2007. "Relative Income, Happiness and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," IZA Discussion Papers 2840, Institute for the Study of Labor (IZA).
  10. Ireland, N. J., 2001. "Optimal income tax in the presence of status effects," Journal of Public Economics, Elsevier, vol. 81(2), pages 193-212, August.
  11. Andrew B. Abel, 1990. "Asset Prices under Habit Formation and Catching up with the Joneses," NBER Working Papers 3279, National Bureau of Economic Research, Inc.
  12. Claudia Senik, 2005. "Income distribution and well-being: what can we learn from subjective data?," Journal of Economic Surveys, Wiley Blackwell, vol. 19(1), pages 43-63, 02.
  13. Gali, Jordi, 1994. "Keeping Up with the Joneses: Consumption Externalities, Portfolio Choice, and Asset Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(1), pages 1-8, February.
  14. Cahit Guven & Bent Sørensen, 2012. "Subjective Well-Being: Keeping Up with the Perception of the Joneses," Social Indicators Research, Springer, vol. 109(3), pages 439-469, December.
  15. Francisco Alvarez-Cuadrado, 2006. "Envy, Leisure, And Restrictions On Working Hours," Departmental Working Papers 2006-01, McGill University, Department of Economics.
  16. Eduardo Pérez-Asenjo, 2011. "If happiness is relative, against whom do we compare ourselves? Implications for labour supply," Journal of Population Economics, Springer, vol. 24(4), pages 1411-1442, October.
  17. AndrewE. Clark & Claudia Senik, 2010. "Who Compares to Whom? The Anatomy of Income Comparisons in Europe," Economic Journal, Royal Economic Society, vol. 120(544), pages 573-594, 05.
  18. Persson, Mats, 1995. " Why Are Taxes So High in Egalitarian Societies?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 569-80, December.
  19. Jennifer Hunt, 1999. "Has Work-Sharing Worked In Germany?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 117-148, February.
  20. Bradley T. Heim, 2007. "The Incredible Shrinking Elasticities: Married Female Labor Supply, 1978–2002," Journal of Human Resources, University of Wisconsin Press, vol. 42(4).
  21. Adrián De la Garza & Giovanni Mastrobuoni & Atsushi Sannabe & Katsunori Yamada, 2010. "The Relative Utility Hypothesis With and Without Self-reported Reference Wages," Working Papers 2010-19, Banco de México.
  22. Ireland, Norman J., 1998. "Status-seeking, income taxation and efficiency," Journal of Public Economics, Elsevier, vol. 70(1), pages 99-113, October.
  23. Pingle, Mark & Mitchell, Mike, 2002. "What motivates positional concerns for income?," Journal of Economic Psychology, Elsevier, vol. 23(1), pages 127-148, February.
  24. 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.
  25. Liu, Wen-Fang & Turnovsky, Stephen J., 2005. "Consumption externalities, production externalities, and long-run macroeconomic efficiency," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 1097-1129, June.
  26. Harald Uhlig & Lars Ljungqvist, 2000. "Tax Policy and Aggregate Demand Management under Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 90(3), pages 356-366, June.
  27. Chris Tsoukis, 2007. "Keeping Up With The Joneses, Growth, And Distribution," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(4), pages 575-600, 09.
  28. Senik, Claudia, 2009. "Direct evidence on income comparisons and their welfare effects," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 408-424, October.
  29. Curtis Eaton & Mukesh Eswaran, 2003. "The evolution of preferences and competition: a rationalization of Veblen's theory of invidious comparisons," Canadian Journal of Economics, Canadian Economics Association, vol. 36(4), pages 832-859, November.
  30. Laurence S. Seidman, 1989. "The Welfare Cost of a Relativistic Economy," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 11(2), pages 295-304, January.
  31. Boskin, Michael J & Sheshinski, Eytan, 1978. "Optimal Redistributive Taxation when Individual Welfare Depends upon Relative Income," The Quarterly Journal of Economics, MIT Press, vol. 92(4), pages 589-601, November.
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