Where the Streets Have a Name: Income Comparisons in the US
46 Pages Posted: 21 Sep 2012
Date Written: September 20, 2012
This paper analyzes the effects of income comparisons on utility using data on self-reported well-being. We rely on a very large survey (BRFSS) and an unprecedented survey conducted by the City of Somerville in order to study this relationship. These data sets allow us to study income comparisons at the county, ZIP code and street-levels. While there is a negative association between respondents' well-being and median income at the county and street-levels, this is the opposite at the ZIP code-level. We disentangle the effects of pure social comparisons and local public goods by including the relative rank in the income distribution in our model. Conditional on relative rank, there is a positive relationship between well-being and median county income. Last, we find evidence of asymmetry and nonlinearities in the comparison process.
Keywords: Income comparisons, rank, relative utility, social interactions, well-being
JEL Classification: C25, D00, J31
Suggested Citation: Suggested Citation