Community, comparisons and subjective well-being in a divided society
Using South African data, the paper poses six questions about the determinants of subjective well-being. Much of the paper is concerned with the role of relative concepts. We find that comparator income, when measured as the average income of others in the local residential cluster, enters the household's utility function positively (close neighbors are 'positives', not 'negatives'), but that the income of more distant others enters negatively. Race-based comparator groups are also important in racially divided South Africa. Relative income is more important to happiness at higher levels of absolute income. Potential explanations and implications of these results are considered.
Kingdon, G.; Knight, J. Community, comparisons and subjective well-being in a divided society. Journal of Economic Behavior and Organization (2007) 64 (1) 69. [DOI: 10.1016/j.jebo.2007.03.004]