Subjective Well-being and Reference Dependence: Insights from Mexico
Colgate University - Department of Economics
March 31, 2011
Journal of Economic Inequality, Forthcoming
Data from Mexico are used to examine whether two indicators of subjective well-being — income satisfaction and income adequacy — correlate not only with the respondent’s absolute level of income, but also with their assessment of how their income compares relative to the income of a reference group, the level of income they hoped to have achieved by that stage of their life, and the income they had three years earlier. Both subjective well-being indicators correlate positively with the ranking relative to all three reference points. Some of the findings differ across segments of the income distribution. Subjective well-being assessments of the poor are influenced more by the inability to achieve income aspirations, while differences with respect to others is a more prominent factor among non-poor respondents.
*Previously circulated: UNU-WIDER Working Paper 2010/76
Number of Pages in PDF File: 32
Keywords: Subjective Well-being, Reference Dependence, Aspirations, Reference Groups
JEL Classification: I32, O12
Date posted: March 2, 2009 ; Last revised: June 8, 2012
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