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Relative Income and Happiness: An Experiment

John Ifcher (), Homa Zarghamee, Daniel Houser and Lina Diaz ()
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John Ifcher: Santa Clara University
Lina Diaz: George Mason University

No 11763, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: John Stuart Mill claimed that "men do not desire merely to be rich, but richer than other men." Do people desire to be richer than others? Or is it that people desire favorable comparisons to others more generally, and being richer is merely a proxy for this ineffable relativity? We conduct an online experiment absent choice in which we measure subjective wellbeing (SWB) before and after an exogenous shock that reveals to subjects how many experimental points they and another subject receive, and whether or not points are worth money. We find that subjects like receiving monetized points significantly more than non-monetized points but dislike being "poorer" than others in monetized and non-monetized points equally, suggesting relative money is valued only for the relative points it represents. We find no evidence that subjects like being "richer" than others. Subgroup analyses reveal women have a strong(er) distaste for being "richer" and "poorer" (than do men), and conservatives have a strong(er) distaste for being "poorer" (than do progressives). Our experimental-SWB approach is easy to administer and can provide some insights a revealed-preference approach cannot, suggesting that it may complement choice-based tasks in future experiments to better estimate preference parameters.

Keywords: subjective well-being; relative income; others' income; income comparisons; happiness; experiments (search for similar items in EconPapers)
JEL-codes: C91 D31 D63 I31 (search for similar items in EconPapers)
Pages: 78 pages
Date: 2018-08
New Economics Papers: this item is included in nep-evo, nep-exp, nep-hap, nep-hpe and nep-ltv
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