The Effect of Relative Income Concerns on Life Satisfaction : Relative Deprivation and Loss Aversion
Leites Lamela, Martín (Universidad de la República)
Ramos Morilla, Xavier (Universitat Autònoma de Barcelona)

Fecha:	2022
Resumen:	Income comparisons are important for individual well-being. We examine the shape of the relationship between relative income and life satisfaction, and test empirically if the features of the value function of prospect theory carry over to experienced utility. We draw on a unique panel dataset for a middle-income country that allows us to work with an endogenous reference income, which differs for individuals with the same observable characteristics depending on the perception error about their relative position in the distribution. We find the value function for experienced utility to be concave for both positive and, at odds with prospect theory, also negative relative income. Loss aversion holds only for incomes that are sufficiently distant from the reference income. Our heterogeneity analysis shows that the slope of the value function is contingent on people's personality, social beliefs, and how much they care about income comparisons.
Ayudas:	Ministerio de Ciencia e Innovación PID2019-104619RB-C43 Agència de Gestió d'Ajuts Universitaris i de Recerca SGR/2017-1571
Nota:	Altres ajuts: acords transformatius de la UAB
Nota:	We are very grateful to Maarten Vendrik, who provided extensive comments to previous versions of the paper. We would also like to thank Ada Ferrer-i-Carbonell, Patricio Dalton and Xavier Raurich for comments and advice. Martín Leites acknowledges financial support of the Carolina foundation as well as of CSIC at University of la República. Xavier Ramos acknowledges financial support of projects PID2019-104619RB-C43 (Ministerio de Ciencia e Innovación), and SGR2017-1571 (Generalitat de Catalunya)
Derechos:	Aquest document està subjecte a una llicència d'ús Creative Commons. Es permet la reproducció total o parcial, la distribució, la comunicació pública de l'obra i la creació d'obres derivades, fins i tot amb finalitats comercials, sempre i quan es reconegui l'autoria de l'obra original.
Lengua:	Anglès
Documento:	Article ; recerca ; Versió publicada
Publicado en:	Journal of Happiness Studies, Vol. 23 Núm. 7 (october 2022) , p. 3485-3515, ISSN 1573-7780

DOI: 10.1007/s10902-022-00555-w

31 p, 1.2 MB

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