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Direct Evidence on Income Comparisons and Subjective Well-Being

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  • Pannenberg, Markus
  • Goerke, Laszlo

Abstract

Subjective well-being (SWB) is generally argued to rise with relative income. However, direct evidence is scarce on whether and how intensively individuals undertake income comparisons, to whom they relate, and what they perceive their relative income to be. In this paper, novel data with direct information on income comparison intensity and perceived relative income with respect to predetermined reference groups is used to provide evidence on the relationship between income comparisons and SWB. We find negative correlations between comparison intensity and SWB for co-workers, people in the same occupation and friends. For job-related reference groups income comparisons are mostly upwards and perceiving to earn less than the reference group has a strong negative effect on SWB.

Suggested Citation

  • Pannenberg, Markus & Goerke, Laszlo, 2013. "Direct Evidence on Income Comparisons and Subjective Well-Being," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79799, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc13:79799
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    References listed on IDEAS

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    Cited by:

    1. Clark, Andrew E. & Senik, Claudia & Yamada, Katsunori, 2017. "When experienced and decision utility concur: The case of income comparisons," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 70(C), pages 1-9.
    2. Devrim Dumludag, 2014. "Satisfaction and comparison income in transition and developed economies," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 61(2), pages 127-152, June.
    3. Dumludag, Devrim & Gokdemir, Ozge & Vendrik, Maarten C.M., 2015. "Relative Income and Life Satisfaction of Turkish Immigrants: The Impact of a Collectivistic Culture," IZA Discussion Papers 9282, Institute of Labor Economics (IZA).
    4. Tim Friehe & Mario Mechtel & Markus Pannenberg, 2014. "Positional Income Concerns: Prevalence and Relationship with Personality and Economic Preferences," IAAEU Discussion Papers 201411, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    5. Melanie Borah & Carina Keldenich & Andreas Knabe, 2019. "Reference Income Effects in the Determination of Equivalence Scales Using Income Satisfaction Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 65(4), pages 736-770, December.
    6. Montizaan, Raymond M. & Vendrik, Maarten C.M., 2014. "Misery Loves Company: Exogenous shocks in retirement expectations and social comparison effects on subjective well-being," Journal of Economic Behavior & Organization, Elsevier, vol. 97(C), pages 1-26.
    7. Devrim Dumludag & Ozge Gokdemir, 2022. "Income Aspiration, Income Comparison and Life Satisfaction: The case of Turkish Migrants in the Netherlands," Journal of Happiness Studies, Springer, vol. 23(4), pages 1359-1378, April.
    8. Adalgiso Amendola & Roberto Dell’Anno & Lavinia Parisi, 2019. "Happiness and inequality in European countries: is it a matter of peer group comparisons?," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 36(2), pages 473-508, July.
    9. Alessa K. Durst, 2021. "Education as a Positional Good? Evidence from the German Socio-Economic Panel," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 155(2), pages 745-767, June.

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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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