Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/142373
Authors: 
Ifcher, John
Zarghamee, Homa
Graham, Carol Lee
Year of Publication: 
2016
Series/Report no.: 
IZA Discussion Papers 9934
Abstract: 
We develop a theoretical framework that integrates four distinct channels through which others' income can affect utility: public goods, cost of living, expectations of future income, and direct effects (relative income hypothesis and/or altruism). We empirically estimate the relationship with U.S. well-being and health data from Gallup and geographically-based median-income data for ZIP codes and MSAs. The relationship is proximity-dependent: positive (negative) with ZIP-code (MSA) median income as reference income, suggesting that positive (negative) channels dominate locally (regionally) and reconciling seemingly divergent results from the literature. Additional analyses provide evidence of the importance of the public-goods and cost-of-living channels.
Subjects: 
relative utility
reference group
others' income
relative income hypothesis
subjective well-being
income comparison
happiness
JEL: 
D6
D31
I31
Document Type: 
Working Paper

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