Direct Evidence on Income Comparisons and Their Welfare Effects

48 Pages Posted: 3 Dec 2007

See all articles by Claudia Senik

Claudia Senik

National Center for Scientific Research - Department and Laboratory of Applied and Theoretical Economics (DELTA); Universite Paris IV Sorbonne; IZA Institute of Labor Economics

Date Written: November 2007

Abstract

This paper provides unheard direct evidence that comparisons exert a significant effect on subjective well-being. It also evaluates the relative importance of different types of benchmarks. Dynamic comparisons outweigh static ones. Internal benchmarks are more important than external reference groups. Local comparisons (to parents, former colleagues or school classmates) are more powerful than general comparisons such as my rank in the social ladder. The most important impact comes from the deterioration of my living standard and from under-performing my former schoolmates or colleagues. A possible interpretation is that comparisons benchmarks are all the more significant as they are interpreted in terms of seized or lost opportunities.

Keywords: subjective well-being, income comparisons, income mobility, internal and external benchmarks, transition

JEL Classification: C25, D31, D63, I31, J31, O57, P3, Z13

Suggested Citation

Senik, Claudia, Direct Evidence on Income Comparisons and Their Welfare Effects (November 2007). IZA Discussion Paper No. 3195, Available at SSRN: https://ssrn.com/abstract=1049442 or http://dx.doi.org/10.2139/ssrn.1049442

Claudia Senik (Contact Author)

National Center for Scientific Research - Department and Laboratory of Applied and Theoretical Economics (DELTA) ( email )

ENS, 48, bd Jourdan
75014 Paris
France
+33 1 4313 6312 (Phone)

Universite Paris IV Sorbonne

Department of Economics
75230 Paris Cedex 05
France
01 43 13 63 12 (Phone)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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