A Curse of Comparison? Evidence on Reference Groups for Relative Income Concerns
31 Pages Posted: 20 Apr 2016
Date Written: January 1, 2009
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.
Keywords: Inequality, Economic Theory & Research, Labor Policies, Poverty Monitoring & Analysis
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