nep-hap New Economics Papers
on Economics of Happiness
Issue of 2011‒05‒07
one paper chosen by
Viviana Di Giovinazzo
University of Milano-Bicocca

  1. Direct evidence on income comparisons and their welfare effects By Claudia Senik

  1. By: Claudia Senik (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, Université Paris-Sorbonne - Ministère de l'Education nationale, de l'Enseignement supérieur et de la Recherche, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris)
    Abstract: 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: subjective well-being ; income comparisons ; demand for income redistribution ; internal and external benchmarks ; transition
    Date: 2011–04–22
    URL: http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-00588023&r=hap

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