Direct evidence on income comparisons and their welfare effects
This paper provides direct evidence that income comparisons exert a significant impact on subjective well-being. It also evaluates the relative importance of different types of benchmarks. Internal comparisons to one's own past living standard outweigh any other comparison benchmarks. Local com...
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Published in | Journal of economic behavior & organization Vol. 72; no. 1; pp. 408 - 424 |
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Main Author | |
Format | Journal Article |
Language | English |
Published |
Amsterdam
Elsevier B.V
01.10.2009
Elsevier Elsevier Sequoia S.A |
Series | Journal of Economic Behavior & Organization |
Subjects | |
Online Access | Get full text |
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Summary: | This paper provides direct evidence that income comparisons exert a significant impact on subjective well-being. It also evaluates the relative importance of different types of benchmarks. Internal comparisons to one's own past living standard outweigh any other comparison benchmarks. Local comparisons (to one's parents, former colleagues or high school mates) are more powerful than self-ranking in the social ladder. The impact of comparisons is asymmetric: under-performing one's benchmark always has a greater welfare effect than out-performing it (in absolute value). Comparisons, which reduce satisfaction also increase the demand for income redistribution, but there, the relative impact of subjective ranking is preponderant. |
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Bibliography: | ObjectType-Article-2 SourceType-Scholarly Journals-1 ObjectType-Feature-1 content type line 23 ObjectType-Article-1 ObjectType-Feature-2 |
ISSN: | 0167-2681 1879-1751 0167-2681 |
DOI: | 10.1016/j.jebo.2009.04.019 |