Local Neighbors as Positives, Regional Neighbors as Negatives: Competing Channels in the Relationship between Others' Income, Health, and Happiness

John Ifcher (), Homa Zarghamee and Carol Graham
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John Ifcher: Santa Clara University

No 9934, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: relative utility; reference group; others' income; relative income hypothesis; subjective well-being; income comparison; happiness (search for similar items in EconPapers)
JEL-codes: D31 D6 I31 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2016-05
New Economics Papers: this item is included in nep-hap, nep-ltv and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Journal Article: Local neighbors as positives, regional neighbors as negatives: Competing channels in the relationship between others’ income, health, and happiness (2018)
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