Economic Choices and Status: Measuring Preferences for Income Rank

Redzo Mujcic () and Paul Frijters
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Redzo Mujcic: University of Warwick

No 5157, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In this paper we report on the trade-offs that 1,068 Australian university students make between absolute income and the rank of that income in hypothetical income distributions. We find that income rank matters independently of absolute income, with greater weight given to rank by males, migrants, and individuals from wealthy families. Rank-sensitive individuals require as much as a 200 per cent increase in income to be compensated for going from the top to the bottom of the income distribution. In terms of reference groups, we find migrants who reside abroad for longer periods of time, and with more affluent job titles, are more likely to compare themselves to others at the destination. This allows us to derive a dynamic choice model of compensating incomes that allows for endogenous tastes and rates of assimilation. The model predicts the average respondent to need a permanent increase in income of up to $10,000 when moving from a society with a mean income of $14,000 (e.g. Mexico) to a society with a mean income of $46,000 (e.g. the USA).

Keywords: status; income rank; relative utility; stated-preferences; migrants (search for similar items in EconPapers)
JEL-codes: C91 D03 J61 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2010-08
New Economics Papers: this item is included in nep-mig
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published - published in: Oxford Economic Papers, 2013, vol. 65(1), 47-73

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Journal Article: Economic choices and status: measuring preferences for income rank (2013)
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