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Choosing Your Pond: Location Choices and Relative Income

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  • Nicolas L. Bottan
  • Ricardo Perez-Truglia

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.

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  • Nicolas L. Bottan & Ricardo Perez-Truglia, 2017. "Choosing Your Pond: Location Choices and Relative Income," NBER Working Papers 23615, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:23615
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    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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