Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/202814 
Year of Publication: 
2019
Series/Report no.: 
IZA Discussion Papers No. 12468
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
There is much evidence that relative income concern reduces subjective wellbeing and raises labour supply – 'keeping up with the Joneses' (KUJ), while increasing use of social media and growing inequality encourage comparison. Models with one or two agent –types generally miss the policy relevant dimension of labour force participation, so we include a distribution of wages with intensive and extensive margins of labour supply, both of which are increased by comparison. The optimal tax response increases with comparison, but, surprisingly, dominates the comparison effect and reduces individual labour supply, thus reversing KUJ, and maintains constant employment, independent of comparison.
Subjects: 
income comparison
maxi-min
inequality
unemployment
JEL: 
H24
D63
Document Type: 
Working Paper

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