Direct Evidence for Income Comparisons and Subjective Well-Being Across Reference Groups

14 Pages Posted: 12 Oct 2015

See all articles by Laszlo Goerke

Laszlo Goerke

University of Trier - Institute of Labour Law and Industrial Relations in the European Union; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Markus Pannenberg

University of Applied Sciences Bielefeld - Department of Business and Economics; DIW Berlin - GSOEP; Institute for the Study of Labor (IZA), Bonn

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Abstract

This note provides evidence for the relationship between income comparisons and subjective well-being (SWB), using novel German data on self-reported comparison intensity and perceived relative income for seven reference groups. We find negative correlations between comparison intensity and SWB for colleagues, people in the same occupation and friends, but not for other reference groups, such as neighbours. Work-related income comparisons are mostly upwards and there is a strong negative correlation between perceiving to earn less than the reference group and SWB.

Keywords: income comparisons, German Socio-Economic Panel (SOEP), relative income, subjective well-being

JEL Classification: D31, D62, I31

Suggested Citation

Goerke, Laszlo and Pannenberg, Markus, Direct Evidence for Income Comparisons and Subjective Well-Being Across Reference Groups. IZA Discussion Paper No. 9395, Available at SSRN: https://ssrn.com/abstract=2672181

Laszlo Goerke (Contact Author)

University of Trier - Institute of Labour Law and Industrial Relations in the European Union ( email )

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Markus Pannenberg

University of Applied Sciences Bielefeld - Department of Business and Economics ( email )

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