The Effects of Relative Income and Absolute Income on Happiness

Abstract

The authors consider the absolute income effect and several relative income effects on happiness. The latter include both a longitudinal comparison, which consists of both upward and downward comparisons, and a parallel comparison with individuals of similar traits. It is found that the longitudinal comparison and parallel comparison exist simultaneously, although the downward comparison is insignificant. However, the symmetry of the upward comparison, downward comparison, and parallel comparison cannot be rejected. Because the absolute income effect and the relative income effects countervail, the effect of income growth on subjective well-being is likely to be negligible. Copyright � 2009 The Authors. Journal compilation � 2009 Blackwell Publishing Ltd.

China’s life satisfaction, 1990–2010

“…In answer, it is pertinent to note the growing evidence of the importance of relative income comparisons and rising material aspirations in China, which tend to negate the effect of rising income (3,7,(45)(46)(47)(48). These findings are consistent with the view common in the happiness literature that the growth in aspirations induced by rising income undercuts the increase in life satisfaction related to rising income itself (49)(50)(51)(52)(53).…”

Subjective Well-Being in China, 2005-2010: The Role of Relative Income, Gender and Location

“…This is consistent with Knight and Gunatilaka (2012) who note that subjective well-being is raised by actual income but lowered by aspiration income. Expected improvement (decline) in personal economic position in the next 10 years positively and significantly (negative and insignificant) affected well-being which is consistent with Tao and Chiu (2009) who found a positive and significant role for upward comparisons in China while the role of downward comparisons is insignificant. 33 This finding is also similar to that of Frijters, Liu and Meng (2012) and Liu and Shang (2012) both of which used data from Chinese Household Income Project 2002 34 .…”

Assessing Health Endowment, Access and Choice Determinants: Impact on Retired Europeans’ (In)activity and Quality of Life

“…age and gender) or socioeconomic influences are determinant. The relative insignificance of absolute economic status to explain well-being has been reported (Tao and Chiu 2009) particularly in higher income developing countries, and when a flow of income is considered rather than a stock of wealth (Howell and Howell 2008). Whereas for elderly Europeans we find high net worth has a low significance impact in quality of life, belonging to a low net worth group has a significant effect on the probability of having poorer quality of life.…”