The Effects of Relative Income and Absolute Income on Happiness

11 Pages Posted: 20 Jan 2009  

H. L. Tao

Soochow University

Shih-Yung Chiu

National Cheng Kung University

Abstract

The authors consider the absolute income effect and several relative income effects on happiness. The latter include both a longitudinal comparison, which consists of both upward and downward comparisons, and a parallel comparison with individuals of similar traits. It is found that the longitudinal comparison and parallel comparison exist simultaneously, although the downward comparison is insignificant. However, the symmetry of the upward comparison, downward comparison, and parallel comparison cannot be rejected. Because the absolute income effect and the relative income effects countervail, the effect of income growth on subjective well-being is likely to be negligible.

Suggested Citation

Tao, H. L. and Chiu, Shih-Yung, The Effects of Relative Income and Absolute Income on Happiness. Review of Development Economics, Vol. 13, Issue 1, pp. 164-174, February 2009. Available at SSRN: https://ssrn.com/abstract=1330662 or http://dx.doi.org/10.1111/j.1467-9361.2008.00492.x

Hung-Lin Tao (Contact Author)

Soochow University ( email )

No. 1 Shizi Street
Taipei, Jiangsu 215006
Taiwan

Shih-Yung Chiu

National Cheng Kung University

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