Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/18429 
Year of Publication: 
2007
Series/Report no.: 
DIW Discussion Papers No. 697
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
We test empirically whether people?s life satisfaction depends on their relative income position in the neighbourhood, drawing on a unique dataset, the German Socio-economic Panel Study (SOEP) matched with micro-marketing indicators of population characteristics. Relative deprivation theory suggests that individuals are happier the better their relative income position in the neighbourhood is. To test this theory we estimate micro-economic happiness models for the years 1994 and 1999 with controls for own income and for neighbourhood income at the zip-code level (roughly 9,000 people). There exist no negative and no statistically significant associations between neighbourhood income and life satisfaction, which refutes relative deprivation theory. If anything, we find positive associations between neighbourhood income and happiness in all cross-sectional models and this is robust to a number of robustness tests, including adding in more controls for neighbourhood quality, changing the outcome variable, and interacting neighbourhood income with indicators that proxy the extent to which individuals may be assumed to interact with their neighbours. We argue that the scale at which we measure neighbourhood characteristics may be too large still to identify the comparison effect sought after.
Subjects: 
Life satisfaction
Neighbourhood effects
Comparison income
Reference group
JEL: 
I31
Z1
C23
Document Type: 
Working Paper

Files in This Item:
File
Size
457.86 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.