| Abstract: |
We test empirically whether people’s life satisfaction depends on their
relative income position in the neighbourhood, drawing on a unique dataset,
the German Socio-economic Panel Study (SOEP) matched with micro-marketing
indicators of population characteristics. Relative deprivation theory suggests
that individuals are happier the better their relative income position in the
neighbourhood is. To test this theory we estimate micro-economic happiness
models for the years 1994 and 1999 with controls for own income and for
neighbourhood income at the zip-code level (roughly 9,000 people). There exist
no negative and no statistically significant associations between
neighbourhood income and life satisfaction, which refutes relative deprivation
theory. If anything, we find positive associations between neighbourhood
income and happiness in all cross-sectional models and this is robust to a
number of robustness tests, including adding in more controls for
neighbourhood quality, changing the outcome variable, and interacting
neighbourhood income with indicators that proxy the extent to which
individuals may be assumed to interact with their neighbours. We argue that
the scale at which we measure neighbourhood characteristics may be too large
still to identify the comparison effect sought after. |