Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/36199 
Year of Publication: 
2009
Series/Report no.: 
IZA Discussion Papers No. 4414
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
This paper provides unprecedented direct evidence from large-scale survey data on both the intensity (how much?) and direction (to whom?) of income comparisons. Income comparisons are considered to be at least somewhat important by three-quarters of Europeans. They are associated with both lower levels of subjective well-being and a greater demand for income redistribution. The rich compare less and are more happy than average when they do, which latter is consistent with relative income theory. With respect to the direction of comparisons, colleagues are the most frequently-cited reference group. Those who compare to colleagues are happier than those who compare to other benchmarks; comparisons to friends are both less widespread and are associated with the lowest well-being scores. This is consistent with information effects, as colleagues' income arguably contains more information about the individual's own future prospects than do the incomes of other reference groups. Last, there is some evidence that reference groups are endogenous, with individuals tending to compare to those with whom they interact the most often.
Subjects: 
Income comparisons
relative income
reference groups
happiness
redistribution
European Social Survey
JEL: 
D31
D63
I3
J31
Z13
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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