Social Exclusion and Well-Being

Abstract

One of the most interesting ideas in social science is the notion that individuals are motivated by concerns about their relative position. We investigate whether individuals feel worse off when they are socially excluded and also if there are greater degrees of social exclusions among their neighbors. To answer these questions, we use nationally representative household survey data from six transition countries, Kazakhstan, Macedonia, Moldova, Serbia, Tajikistan and Ukraine. First, we revisit the previous findings of the negative (in some cases, positive) effect of the reference group income (or earnings) on self-reported well-being (SWB) of individuals. We find that, controlling for an individual's own consumption, higher consumption of reference groups are associated with lower levels of SWB in the pooled sample of individuals from six countries. When the results are estimated by countries, reference group consumption has no effect on SWB in Kazakhstan, Macedonia, Moldova and Serbia while it has negative effect in Tajikistan (consistent with relative income hypothesis) and positive effect in Ukraine (consistent with Hirschman's tunnel effect). However, these results are not consistent across alternative conceptualization of appropriate reference groups, with the exception of Tajikistan, which appears to be driving the aggregate results. Second, we find that socially excluded households have lower levels of SWB while controlling for own consumption and consumption of reference group, a finding consistent across alternative conceptualization of the reference groups. Finally, we investigate whether individuals feel worse off when there are greater degrees of social exclusions in their reference groups ("social solidarity effect"). We find a strong evidence for our conjecture.

Keywords: relative consumption, social exclusion, well-being

JEL Classification: D6, H0, J0