Choosing Your Pond: Location Choices and Relative Income

Nicolas Bottan and Ricardo Perez-Truglia

The Review of Economics and Statistics, 2022, vol. 104, issue 5, 1010-1027

Abstract: Do individuals care about their relative income? While this is a long-standing hypothesis, revealed-preference evidence remains elusive. We provide a unique test by studying residential choices: individuals often must choose between places with different income distributions, and as a result they "choose" their relative income. We conducted a field experiment with 1,080 senior medical students who participated in the National Resident Matching Program. We estimate their preferences by combining choice data, survey data on perceptions, and information-provision experiments. The evidence suggests that individuals care about their relative income and that these preferences differ across single and nonsingle individuals.

Date: 2022
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https://doi.org/10.1162/rest_a_00991
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Working Paper: Choosing Your Pond: Location Choices and Relative Income (2017)
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