Income Comparisons and Non-Cognitive Skills

Santiago Budria Rodriguez () and Ada Ferrer-i-Carbonell

No 6419, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: People gain utility from occupying a higher ranked position in the income distribution of the reference group. This paper investigates whether these gains depend on an individual's set of non-cognitive skills. Using the 2000-2008 waves of the German Socioeconomic Panel dataset (SOEP), a subjective question on Life Satisfaction, and three different sets of non-cognitive skills indicators, we find significant and robust differences across skills groups. People who are more neurotic, extravert and have low external locus of control and low negative reciprocity are more sensitive to their individual position in the economic ladder. By contrast, the Life Satisfaction reaction to changes in economic status is significantly lower among individuals who score high (low) in negative (positive) reciprocity, and are at the bottom of the distribution of neuroticism, extraversion. The heterogeneity on the importance of income comparisons needs to be taken into account when, for example, introducing them into economic models, predicting individuals' behaviour, or making welfare judgments.

Keywords: personality traits; income comparisons; life satisfaction (search for similar items in EconPapers)
JEL-codes: D62 I31 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2012-03
New Economics Papers: this item is included in nep-cbe, nep-ltv and nep-neu
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

Published - published as 'Life Satisfaction, Income Comparisons and Individual Traits' in: Review of Income and Wealth, 2019, 65 (2), 337 - 357

Downloads: (external link)
https://docs.iza.org/dp6419.pdf (application/pdf)

Related works:
Working Paper: Income Comparisons and Non-Cognitive Skills (2015)
Working Paper: Income Comparisons and Non-cognitive Skills (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp6419

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().