Choosing Your Pond: Location Choices and Relative Income

165 Pages Posted: 25 Jul 2017 Last revised: 16 Nov 2020

See all articles by Nicolas L. Bottan

Nicolas L. Bottan

Cornell University - Department of Policy Analysis and Management

Ricardo Perez-Truglia

University of California, Berkeley; National Bureau of Economic Research (NBER)

Date Written: December 1, 2017

Abstract

Do individuals care about their relative income? While this is a long-standing hypothesis, revealed-preference evidence remains elusive. We provide a unique test by studying residential choices: individuals often must choose between places with different income distributions, and as a result they “choose” their relative income. We conducted a field experiment with 1,080 senior medical students who participated in the National Resident Matching Program. We estimate their preferences by combining choice data, survey data on perceptions and information-provision experiments. The evidence suggests that individuals care about their relative income and that these preferences differ across single and non-single individuals.

Keywords: location choices, relative income, learning, field experiment

JEL Classification: D03, D60, D31, D80, I31, K34, Z10

Suggested Citation

Bottan, Nicolas Luis and Perez-Truglia, Ricardo, Choosing Your Pond: Location Choices and Relative Income (December 1, 2017). Available at SSRN: https://ssrn.com/abstract=3007167 or http://dx.doi.org/10.2139/ssrn.3007167

Nicolas Luis Bottan

Cornell University - Department of Policy Analysis and Management ( email )

Ithaca, NY
United States
6072555724 (Phone)

HOME PAGE: http://https://www.nicolasbottan.com

Ricardo Perez-Truglia (Contact Author)

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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