Status, Happiness, and Relative Income
John A. Beath
University of St. Andrews
Felix R. Fitzroy
University of St. Andrews; Institute for the Study of Labor (IZA)
IZA Discussion Paper No. 2658
Models of status based on Frank's (1985) count of the number of people with lower conspicuous consumption are inconsistent with the extensive empirical literature on happiness and well-being. The alternative approach to consumption interaction which uses some form of relative income has been developed in various contexts. These predict that a representative agent's well-being will increase with real income or consumption. However, this is again inconsistent with the time-series evidence for advanced economies. In this paper we combine a simple model of relative income with a distribution of ability that correctly predicts both time series results of near constant utility, and the positive, concave cross-sectional relation between income, working time and happiness.
Number of Pages in PDF File: 29
Keywords: status, happiness, relative income
JEL Classification: D01, D31, D6working papers series
Date posted: March 13, 2007
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo4 in 0.610 seconds