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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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  19. 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.
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  34. repec:cup:cbooks:9780521801423 is not listed on IDEAS
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