Direct Evidence on Income Comparisons and their Welfare Effects

Claudia Senik ()

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Abstract: This paper provides direct evidence that income comparisons exert a significant impact on subjective well-being. It also evaluates the relative importance of different types of benchmarks. Internal comparisons to one's own past living standard outweigh any other comparison benchmarks. Local comparisons (to one's parents, former colleagues or high-school mates) are more powerful than self-ranking in the social ladder. The impact of comparisons is asymmetric: under-performing one's benchmark always has a greater welfare effect than out-performing it (in absolute value). Comparisons which reduce satisfaction also increase the demand for income redistribution, but there, the relative impact of subjective ranking is preponderant.

Keywords: C25; D31; D63; I31; J31; O57; P3; Z13; Subjective well-being; Income comparisons; Demand for income redistribution; Internal and external benchmarks; Transition (search for similar items in EconPapers)
Date: 2009-05-13
Note: View the original document on HAL open archive server: https://hal.science/hal-00696621
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Citations: View citations in EconPapers (244)

Published in Journal of Economic Behavior and Organization, 2009, 72 (1), pp.408. ⟨10.1016/j.jebo.2009.04.019⟩

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Related works:
Journal Article: Direct evidence on income comparisons and their welfare effects (2009)
Working Paper: Direct evidence on income comparisons and their welfare effects (2008)
Working Paper: Direct Evidence on Income Comparisons and their Welfare Effects (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00696621

DOI: 10.1016/j.jebo.2009.04.019

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