The Role of Proximity in Social Income Dynamic Comparisons and Well-Being

Raquel Fonseca and Ana I. Moro-Egido

Cahiers de recherche / Working Papers from Chaire de recherche sur les enjeux économiques intergénérationnels / Research Chair in Intergenerational Economics

Abstract: The present study investigates the role of proximity in shaping social income static and dynamic comparisons and their impact on well-being, measured in terms of self-assessed health. Using the Spanish Survey of Household Finances (2002-2017), the study examines how individuals compare their income trajectories with those of their peers, considering varying degrees of proximity. The findings reveal that well-being is negatively impacted by static comparisons only in the case of a significant income gap with richer individuals. However, when dynamic comparisons are introduced, individuals experience an improvement in their subjective well-being when comparing to individuals who previously earned more but now earn less, as long as they drop at a certain distance. Consequently, no effect is observed when comparing with individuals in closer proximity, and effects emerge when the degree of proximity is low.

Keywords: static and dynamic relative hypotheses; income; proximity; well-being. (search for similar items in EconPapers)
JEL-codes: C29 D31 I31 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-eur
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