Direct evidence on income comparisons and their welfare effects
Pre-print, Working paper: This paper provides direct evidence that comparisons exert a significant effect 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 JEL
Keywords
- Subjective well-being
- Income comparisons
- Demand for income redistribution
- Internal and external benchmarks
- Transition
Internal reference
- PSE Working Papers n°2007-19
URL of the HAL notice
Version
- 1