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Income Inequality and Job Satisfaction of Full-Time Employees in Germany

Author

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  • Wunder, Christoph

    (Martin-Luther University, Halle-Wittenberg)

  • Schwarze, Johannes

    (University of Bamberg)

Abstract

Using data from the German Socio-Economic Panel Study (GSOEP), it is shown that income comparison with persons who are better off has a clear impact on the job satisfaction of West German full-time employees. Two contrary effects can be identified. On the one hand, there is an aversion to disadvantageous regional income inequality, while on the other hand, individuals prefer inequality within their occupational group. The two effects are interpreted as envy and an information (or “tunnel”) effect, respectively. The analysis of income comparison with persons who are worse off suggests a prestige effect. However, downward comparison is of minor importance for job satisfaction.

Suggested Citation

  • Wunder, Christoph & Schwarze, Johannes, 2006. "Income Inequality and Job Satisfaction of Full-Time Employees in Germany," IZA Discussion Papers 2084, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp2084
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    Cited by:

    1. Conchita D'Ambrosio & Joachim R. Frick, 2012. "Individual Wellbeing in a Dynamic Perspective," Economica, London School of Economics and Political Science, vol. 79(314), pages 284-302, April.
    2. Benno Torgler & Markus Schaffner & Sascha L. Schmidt & Bruno S. Frey, 2008. "Do Employees Care about their Relative Position? Behavioural Evidence Focusing on Performance," CREMA Working Paper Series 2008-12, Center for Research in Economics, Management and the Arts (CREMA).
    3. Ambra Poggi, 2010. "Within-establishment wage inequality and satisfaction," LABORatorio R. Revelli Working Papers Series 100, LABORatorio R. Revelli, Centre for Employment Studies.

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    More about this item

    Keywords

    social comparison; German Socio-Economic Panel Study (GSOEP); prestige; envy; job satisfaction; income inequality; information effect (tunnel effect);
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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