The Optimal Choice of a Reference Standard for Income Comparisons: Indirect Evidence from Immigrants' Return Visits

Holger Stichnoth

No 264, SOEPpapers on Multidisciplinary Panel Data Research from DIW Berlin, The German Socio-Economic Panel (SOEP)

Abstract: I propose two new tests of Falk and Knell's (2004) prediction that individuals' reference income increases with ability. To overcome the difficulty that the reference incomeis not observed in existing large data sets, I extend Falk and Knell's model to establish a link between immigrants' reference income and their return visits to their countries of origin. I derive the (arguably counter-intuitive) predictions that more educated immigrants are less likely to have returned to their country of origin for a visit, and that they are more likely to have difficulty feeling at home when they do return for a visit. Both predictions are confirmed on four waves of data from the German Socio-Economic Panel. The estimated marginal effects are statistically significant, but rather small in size.

Keywords: reference standard; social comparison; immigration; Germany (search for similar items in EconPapers)
JEL-codes: D62 D63 H31 Z13 (search for similar items in EconPapers)
Pages: 21 p.
Date: 2010
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: The optimal choice of a reference standard for income comparisons: indirect evidence from immigrants' return visits (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:diw:diwsop:diw_sp264

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