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A Curse of Comparison? Evidence on Reference Groups for Relative Income Concerns

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  • Kuegler, Alice

    (The World Bank)

Abstract

This paper proposes that individuals care about the relative income of proximate reference groups. Making use of self-reported life satisfaction as a proxy for unobservable utility, the relative income of siblings is tested for relevance as a reference point for new sample data from Venezuela. Having greater perceived income than one's siblings is found to be positively linked to individual life satisfaction. This evidence supplements the scarce economic research on reference groups, supporting the hypothesis that individuals with proximate characteristics and resembling opportunities in life serve as points of comparison.

Suggested Citation

  • Kuegler, Alice, 2009. "A Curse of Comparison? Evidence on Reference Groups for Relative Income Concerns," Policy Research Working Paper Series 4820, The World Bank.
    • Handle: RePEc:wbk:wbrwps:4820
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    2. Andrew E. Clark & Claudia Senik, 2010. "Will GDP growth increase happiness in developing countries?," PSE Working Papers halshs-00564985, HAL.
    3. Lewis Davis, 2019. "Growth, Inequality and Tunnel Effects: A Formal Mode," Journal of Happiness Studies, Springer, vol. 20(4), pages 1103-1119, April.
    4. Lewis Davis & Stephen Wu, 2014. "Social Comparisons and Life Satisfaction Across Racial and Ethnic Groups: The Effects of Status, Information and Solidarity," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 117(3), pages 849-869, July.
    5. Peter, Noemi & Lundborg, Petter & Mikkelsen, Sara & Webbink, Dinand, 2018. "The effect of a sibling’s gender on earnings and family formation," Labour Economics, Elsevier, vol. 54(C), pages 61-78.
    6. Peter, Noemi & Lundborg, Petter & Webbink, Dinand, 2015. "The Effect of a Sibling's Gender on Earnings, Education and Family Formation," IZA Discussion Papers 9128, Institute of Labor Economics (IZA).
    7. Davis, Lewis S., 2018. "Political economy of growth with a taste for status," Journal of Public Economics, Elsevier, vol. 168(C), pages 35-46.
    8. La, Binh Thanh & Lim, Steven & Cameron, Michael P. & Tran, Tuyen Quang & Nguyen, Minh Thi, 2021. "Absolute income, comparison income and subjective well-being in a transitional country: Panel evidence from Vietnamese household surveys," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 368-385.
    9. Silber, Jacques & Verme, Paolo, 2012. "Relative deprivation, reference groups and the assessment of standard of living," Economic Systems, Elsevier, vol. 36(1), pages 31-45.
    10. Hania Fei Wu, 2021. "Relative Income Status Within Marriage and Subjective Well-Being in China: Evidence from Observational and Quasi-Experimental Data," Journal of Happiness Studies, Springer, vol. 22(1), pages 447-466, January.
    11. Jinan Zeidan, 2015. "Are Comparisons Luxuries? Subjective Poverty and Positional Concerns in Indonesia," AMSE Working Papers 1505, Aix-Marseille School of Economics, France.
    12. Sara B. Heller & Brian A. Jacob & Jens Ludwig, 2010. "Family Income, Neighborhood Poverty, and Crime," NBER Chapters, in: Controlling Crime: Strategies and Tradeoffs, pages 419-459, National Bureau of Economic Research, Inc.
    13. Rik Linssen & Luuk Kempen & Gerbert Kraaykamp, 2011. "Subjective Well-being in Rural India: The Curse of Conspicuous Consumption," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 101(1), pages 57-72, March.
    14. Chenghua Guan & Yingjie Qiu & Ruopeng An, 2019. "Relative Income and Life Satisfaction among Chinese Adults," Sustainability, MDPI, vol. 11(20), pages 1-12, October.
    15. Lee, Won Fy, 2012. "The Effect of Relative Income in the Dynamics of Migration: Evidence from the VHLSS Panel Data," Master's Theses and Plan B Papers 142096, University of Minnesota, Department of Applied Economics.
    16. Jinan Zeidan, 2015. "Are Comparisons Luxuries? Subjective Poverty and Positional Concerns in Indonesia," Working Papers halshs-01114396, HAL.

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    More about this item

    Keywords

    reference groups; relative income; life satisfaction;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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