Status, Happiness, and Relative Income

John Beath () and Felix FitzRoy
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John Beath: University of St. Andrews

No 2658, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Models of status based on Frank’s (1985) count of the number of people with lower conspicuous consumption are inconsistent with the extensive empirical literature on happiness and well-being. The alternative approach to consumption interaction which uses some form of relative income has been developed in various contexts. These predict that a representative agent’s well-being will increase with real income or consumption. However, this is again inconsistent with the time-series evidence for advanced economies. In this paper we combine a simple model of relative income with a distribution of ability that correctly predicts both time series results of near constant utility, and the positive, concave cross-sectional relation between income, working time and happiness.

Keywords: status; happiness; relative income (search for similar items in EconPapers)
JEL-codes: D01 D31 D6 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2007-03
New Economics Papers: this item is included in nep-cbe, nep-hpe and nep-soc
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Citations: View citations in EconPapers (6)

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