Absolute vs Relative Income and Life Satisfaction

Jonna Rickardsson () and Charlotta Mellander
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Jonna Rickardsson: Jönköping International Business School (JIBS)

No 451, Working Paper Series in Economics and Institutions of Innovation from Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: This paper examines whether subjective life-satisfaction is most strongly related to absolute or relative income in terms of either proximal neighbors or a wider aggregated region. The analysis utilizes two unique datasets - survey data on happiness in combination with fine-level income data for postal codes and municipalities. We find a significant relationship between happiness and both personal income and relative income position among nearby neighbors and more remote neighbors. Hence, being rich as well as being richer than others in the area increases the likelihood of being more satisfied with life. Above all, we find individuals’ level of life-satisfaction to be more strongly related to the income of people in the larger municipality than to the income of nearby neighbors.

Keywords: Life-satisfaction; Happiness; Subjective well-being; Absolute income; Relative income (search for similar items in EconPapers)
JEL-codes: I31 O15 P46 R10 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2017-03-17
New Economics Papers: this item is included in nep-hap
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:cesisp:0451

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