Top

Journal of Happiness Studies

Published in:

20-05-2016 | Research Paper

An Experimental Investigation of the Impact of Absolute and Relative Inequalities on Individual Satisfaction

Author: Jérémy Celse

Published in: Journal of Happiness Studies | Issue 4/2017

Activate our intelligent search to find suitable subject content or patents.

search-config

AI-assisted search

Off

Abstract

Whereas recent evidences suggest absolute inequalities (i.e. inequalities between agents’ income measured in absolute terms) and relative inequalities (i.e. inequalities captured by the ratio between agents’ income) to have different cognitive implications, econometric models consider both measures as interchangeable when referring to individual satisfaction. Do income inequalities measured both on relative and absolute terms lead to the same effect on individual satisfaction? We implement an experimental protocol so as to investigate the impact of income inequalities on individual satisfaction. By implementing different treatments, we disentangle the impact of absolute income inequalities from the impact of relative income inequalities on individual satisfaction. We observe that individual satisfaction is significantly and negatively correlated to absolute income inequalities. Relative inequalities seem to have no effect on individual satisfaction.

next article The Benefits of Transcending Self-Interest: Examining the Role of Self-Transcendence on Expressive Suppression and Well-Being

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

In this paper, we use the words “happiness”, “satisfaction” and “well-being” as if they were interchangeable. For a definition of these concepts, see Angner (2010), Diener (1984), Kahneman et al. (1999).

Refer to Clark et al. (2008); Senik (2005, 2009) for an extensive review of the existing literature.

The notions of absolute and relative differences mentioned in this paper contrast with the notions of absolute income (namely the absolute level of an agent's income) and of relative income (namely how one's income lies in the income distribution of a given reference group) often used in the happiness literature.

Among the few laboratory experiments related to subjective well-being, the only papers using a monetary incentivised laboratory experiment are conducted by Charness and Grosskopf (2001) and McBride (2010).

Ball and Chernova (2008) found opposite conclusions: relative income (defined as the agent's absolute income proportion relative to his or her country's median absolute income) exerts a significantly higher impact on subjective well-being than absolute income. This difference can be explained by the different definitions of relative income adopted by the authors.

On aggregate, 218 participants (109 pairs) have participated to our experiment but due to a technical incident the data of 33 participants have been lost. Then the paper is based on 175 participants.

Negative emotions such as anger or envy are known for arising quickly and being experienced intensively (Ben-Ze’ev 1994; Keltner and Lerner 2010; Kemper and Lazarus 1992). We conjecture that the time participants take for evaluating their satisfaction can capture the experience of negative emotions and can have an impact on participants’ satisfaction. In addition, it is acknowledged that negative emotions cause a drop in satisfaction levels (Smith and Kim 2007).

We thank an anonymous referee for highlighting that point.

Despite working efficiently with small sample size, Chin (1998) suggests to use at least 10 independent observations per predictor.

We thank an anonymous referee for pointing that issue.

Alpizar, F., Carlsson, F., & Johansson-Stenman, O. (2005). How much do we care about absolute versus relative income and consumption? Journal of Economic Behavior & Organization, 56(3), 405–421. doi:10.1016/j.jebo.2002.10.007.CrossRef

Angner, E. (2010). Subjective well-being. Journal of Socio-Economics, 39(3), 361–368. doi:10.1016/j.socec.2009.12.001.CrossRef

Azmat, G., & Iriberri, N. (2016). The provision of relative performance feedback: An analysis of performance and satisfaction. Journal of Economics and Management Strategy, 25(1), 77–110.CrossRef

Ball, R., & Chernova, K. (2008). Absolute income, relative income, and happiness. Social Indicators Research, 88(3), 497–529. doi:10.1007/s11205-007-9217-0.CrossRef

Bault, N., Coricelli, G., & Rustichini, A. (2008). Interdependent utilities: How social ranking affects choice behavior. PLoS ONE,. doi:10.1371/journal.pone.0003477.

Ben-Shakhar, G., Bornstein, G., Hopfensitz, A., & van Winden, F. (2007). Reciprocity and emotions in bargaining using physiological and self-report measures. Journal of Economic Psychology, 28(3), 314–323. doi:10.1016/j.joep.2007.02.005.CrossRef

Ben-Ze’ev, A. (1994). Understanding emotions. History of European Ideas,. doi:10.1016/0191-6599(94)90151-1.

Blanchflower, D. G., & Oswald, A. J. (2004). Well-being over time in Britain and the USA. Journal of Public Economics, 88(7–8), 1359–1386. doi:10.1016/S0047-2727(02)00168-8.CrossRef

Bolton, G. E., & Ockenfels, A. (2000). ERC: A theory of equity, reciprocity, and competition. American Economic Review, 90(1), 166–193. http://www.jstor.org/stable/117286.

Brown, G. D. A., Gardner, J., Oswald, A. J., & Qian, J. (2008). Does wage rank affect employees’ well-being? Industrial Relations, 47(3), 355–389. doi:10.1111/j.1468-232X.2008.00525.x.

Camerer, C. (2003). Behavioral game theory: Experiments in strategic interaction. Insights in Decision Making: A Tribute to Hillel J. Einhorn,. doi:10.1024/0301-1526.32.1.54.

Cassel, C., Hackl, P., & Westlund, A. H. (1999). Robustness of partial least-squares method for estimating latent variable quality structures. Journal of Applied Statistics, 26(4), 435–446. doi:10.1080/02664769922322.CrossRef

Celse, J. (2009). Will Joe the plumber envy Bill Gates? The impact of both absolute and relative difference on interdependent preferences. Revue d’Economie Politique. www.lameta.univ-montp1.fr/Documents/DR2009-26.pdf.

Charness, G., & Grosskopf, B. (2001). Relative payoffs and happiness: An experimental study. Journal of Economic Behavior & Organization, 45(3), 301–328. doi:10.1016/S0167-2681(01)00148-2.CrossRef

Chetty, S., Johanson, M., & Martín, O. M. (2014). Speed of internationalization: Conceptualization, measurement and validation. Journal of World Business, 49(4), 633–650. doi:10.1016/j.jwb.2013.12.014.CrossRef

Chin, W. W. (1998). The partial least squares approach to structural equation modeling. In Modern Methods for Business Research,. doi:10.1016/j.aap.2008.12.010.

Chin, W., & Newsted, P. (1999). Structural equation modeling analysis with small samples using partial least squares. In Statistical strategies for small sample research (pp. 307–341).

Clark, A. E., Frijters, P., & Shields, M. A. (2008). Relative income, happiness, and utility: An explanation for the Easterlin paradox and other puzzles. Journal of Economic Literature,. doi:10.1257/jel.46.1.95.

Clark, A. E., & Oswald, A. J. (1996). Satisfaction and comparison income. Journal of Public Economics, 61(3), 359–381. doi:10.1016/0047-2727(95)01564-7.CrossRef

Clark, A. E., & Oswald, A. J. (1998). Comparison-concave utility and following behaviour in social and economic settings. Journal of Public Economics, 70, 133–155. doi:10.1016/S0047-2727(98)00064-4.CrossRef

Cohn, A., Fehr, E., Herrmann, B., & Schneider, F. (2011). Social comparison in the workplace: Evidence from a field experiment (vol. 5550, pp. 1–32). http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1778894.

Diener, E. (1984). Subjective well-being. Psychological Bulletin, 95(3), 542–575. doi:10.1037/0033-2909.95.3.542.CrossRef

Diener, E. D., & Diener, C. (1995). The wealth of nations revisited: Income and quality of life. Social Indicators Research, 36(3), 275–286. doi:10.1007/BF01078817.CrossRef

Diener, E., Diener, M., & Diener, C. (1995). Factors predicting the subjective well-being of nations. Journal of Personality and Social Psychology, 69(5), 851–864. doi:10.1037/0022-3514.69.5.851.CrossRef

Diener, E., Schimmack, U., Lucas, R., & Helliwell, J. (2009). Well-being for public policy. In E. Diener, R. Lucas, U. Schimmack, & J. Helliwell (Eds.), Oxford Pos. Oxford: Oxford University Press.

Dijkstra, T. (1983). Some comments on maximum likelihood and partial least squares methods. Journal of Econometrics, 22(1–2), 67–90. doi:10.1016/0304-4076(83)90094-5.CrossRef

Dohmen, T., Falk, A., Fliessbach, K., Sunde, U., & Weber, B. (2011). Relative versus absolute income, joy of winning, and gender: Brain imaging evidence. Journal of Public Economics, 95(3–4), 279–285. doi:10.1016/j.jpubeco.2010.11.025.CrossRef

Duesenberry, J. S. (1974). Alternatives to monetary policy. American Economic Review, 64(2). http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=4494239&site=ehost-live&scope=site.

Easterlin, R. A. (1974). Does economic growth improve the human lot some empirical evidence. In Nations and Households in Economic Growth,. doi:10.1016/B978-0-12-205050-3.50008-7.

Easterlin, R. A. (1995). Will raising the incomes of all increase the happiness of all? Journal of Economic Behavior & Organization, 27(1), 35–47. doi:10.1016/0167-2681(95)00003-B.CrossRef

Easterlin, R. A. (2001). Income and happiness: Towards a unified theory. Economic Journal, 111(473), 465–484. doi:10.2307/2667943.CrossRef

Easterlin, R. A. (2003). Explaining happiness. Proceedings of the National Academy of Sciences of the United States of America, 100(19), 11176–11183. doi:10.1073/pnas.1633144100.CrossRef

Engelmann, D., & Strobel, M. (2004). Preferences in and maximin aversion, efficiency, inequality simple distribution experiments. American Economic Review, 94(4), 857–869. doi:10.2307/3592796.CrossRef

Fehr, E., & Schmidt, K. M. (1999). A theory of fairness, competition, and cooperation. Quarterly Journal of Economics,. doi:10.1162/003355399556151.

Fehr, E., & Schmidt, K. M. (2006). The economics of fairness, reciprocity and Altruism—Experimental evidence and new theories. Handbook of the Economics of Giving, Altruism and Reciprocity, 1(06), 615–691.CrossRef

Ferrer-i-Carbonell, A. (2005). Income and well-being: An empirical analysis of the comparison income effect. Journal of Public Economics, 89(5–6), 997–1019. doi:10.1016/j.jpubeco.2004.06.003.CrossRef

Ferrer-i-Carbonell, A., & Frijters, P. (2004). How important is methodology for the estimate of the determinants of hapiness? The Economic Journal, 114(1997), 641–659.CrossRef

Festinger, L. (1954). A theory of social comparison processes. Human Relations, 7(2), 117–140. doi:10.1177/001872675400700202.CrossRef

Fliessbach, K., Weber, B., Trautner, P., Dohmen, T., Sunde, U., Elger, C. E., & Falk, A. (2007). Social comparison affects reward-related brain activity in the human ventral striatum. Science (New York, N.Y.), 318(5854), 1305–1308.CrossRef

Fornell, C., & Bookstein, F. L. (1982). Two structural equation models: LISREL and PLS applied to consumer exit-voice theory. Journal of Marketing Research, 19(4), 440. doi:10.2307/3151718.CrossRef

Frank R. H., & Sunstein, C. R. (2001). Cost-benefit analysis and relative position. University of Chicago Law Review, 68(2), 323. http://www.scopus.com/inward/record.url?eid=2-s2.0-0347710291&partnerID=40&md5=1a08bd6e895939e3804b1cfc6e23ed6e.

Frey, B. S., & Stutzer, A. (2002). What can economists learn from happiness research? Journal of Economic Literature, 40(2), 402–435.CrossRef

Gächter, S., & Thöni, C. (2010). Social comparison and performance: Experimental evidence on the fair wage–effort hypothesis. Journal of Economic Behavior & Organization, 76(3), 531–543. doi:10.1016/j.jebo.2010.08.008.CrossRef

Gardner, J., & Oswald, A. J. (2007). Money and mental wellbeing: A longitudinal study of medium-sized lottery wins. Journal of Health Economics, 26(1), 49–60. doi:10.1016/j.jhealeco.2006.08.004.CrossRef

Gneezy, U., & Rustichini, A. (2000). Pay Enough or Don’ t Pay at All Author (s): Published by : Oxford University Press. The Quarterly Journal of Economics, 115(3), 791–810.CrossRef

Hagerty, M. R., & Veenhoven, R. (2003). Wealth and happiness revisited—Growing national income does go with greater happiness. Social Indicators Research, 64(1), 1–27. doi:10.1023/A:1024790530822.CrossRef

Helliwell, J. F., & Barrington-Leigh, C. P. (2010). Viewpoint: Measuring and understanding subjective well-being. Canadian Journal of Economics, 43(3), 729–753. doi:10.1111/j.1540-5982.2010.01592.x.CrossRef

Johansson-Stenman, O., Carlsson, F., & Daruvala, D. (2002). Measuring future grandparents’ preferences for equality and relative standing. Economic Journal, 112(479), 362–383. doi:10.1111/1468-0297.00040.CrossRef

Kagel, J. H., & Roth, A. E. (1995). The handbook of experimental economics. Economic Theory,. doi:10.2307/1243316.

Kahneman, D., Diener, E., & Schwarz, N. (1999). Well-being: The foundations of hedonic psychology. Health San Francisco, xii, 593. doi:10.7758/9781610443258.

Kahneman, D., & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47(2), 263–291. doi:10.2307/1914185.CrossRef

Keltner, D., & Lerner, J. S. (2010). Emotion. In Handbook of Social Psychology,. doi:10.1039/pc9797600253.

Kemper, T. D., & Lazarus, R. S. (1992). Emotion and adaptation. Contemporary Sociology,. doi:10.2307/2075902.

Knight, J., Song, L., & Gunatilaka, R. (2009). Subjective well-being and its determinants in rural China. China Economic Review, 20(4), 635–649. doi:10.1016/j.chieco.2008.09.003.CrossRef

Ledyard, J. (1994). Public goods: A survey of experimental research. Public Economics,. doi:10.1016/0037-7856(73)90129-7.

Leibbrandt, A., & López-Pérez, R. (2012). An exploration of third and second party punishment in ten simple games. Journal of Economic Behavior & Organization, 84(3), 753–766. doi:10.1016/j.jebo.2012.09.018.CrossRef

Lelkes, O. (2008). Happiness across the life cycle: Exploring age-specific preferences. European Centre Policy Brief, 2, 1–16.

Luttmer, E. F. P. (2005). Neighbors as negatives: Relative earnings and well-being. Quarterly Journal of Economics, 120(3), 963–1002. doi:10.1162/003355305774268255.

Marcoulides, G. A., & Saunders, C. (2006). PLS: A silver bullet? MIS Quarterly, 30(2), iii–ix. Editorial.

McBride, M. (2010). Money, happiness, and aspirations: An experimental study. Journal of Economic Behavior & Organization, 74(3), 262–276. doi:10.1016/j.jebo.2010.03.002.CrossRef

Michalos, A. C. (1985). Multiple discrepancies theory (MDT). Social Indicators Research, 16(4), 347–413. doi:10.1007/BF00333288.CrossRef

Miles, D., & Rossi, M. (2007). Learning about one’s relative position and subjective well-being. Applied Economics, 39(13), 1711–1718.CrossRef

Neumark, D., & Postlewaite, A. (1998). Relative income concerns and the rise in married women’s employment. Journal of Public Economics, 70(1), 157–183. doi:10.1016/S0047-2727(98)00065-6.CrossRef

O’Doherty, J. P. (2004). Reward representations and reward-related learning in the human brain: Insights from neuroimaging. Current Opinion in Neurobiology, 14(6), 769–776. doi:10.1016/j.conb.2004.10.016.CrossRef

Oswald, A. J., Proto, E., & Sgroi, D. (2015). Happiness and productivity. Journal of Labor Economics, 33(4), 789–822. doi:10.1086/681096.CrossRef

Rigdon, E. E. (2012). Rethinking partial least squares path modeling. In praise of simple methods. Long Range Planning, 45(5–6), 341–358. doi:10.1016/j.lrp.2012.09.010.CrossRef

Rigdon, E. E. (2014). Rethinking partial least squares path modeling: Breaking chains and forging ahead. Long Range Planning, 47(3), 161–167. doi:10.1016/j.lrp.2014.02.003.CrossRef

Ross, M., Eyman, A., & Kishchuck, N. (1986). Determinants of subjective well-being. In J. M. Oslon, C. Herman, & M. Zanna (Eds.), Relative Deprivation and Social Comparison. Hillsdale: Erlbaum.

Schwarz, N. (1999). Self-reports: How the questions shape the answers. American Psychologist, 54(2), 93–105. doi:10.1037/0003-066X.54.2.93.CrossRef

Schwarz, N., & Strack, F. (1999). Reports of subjective well-being: Judgmental processes and their methodological implications. Well-Being: The Foundations of Hedonic Psychology,. doi:10.7758/9781610443258.

Senik, C. (2005). Income distribution and well-Being: What can we learn from subjective data? Journal of Economic Surveys, 19(1), 43–63. doi:10.1111/j.0950-0804.2005.00238.x.CrossRef

Senik, C. (2009). Direct evidence on income comparisons and their welfare effects. Journal of Economic Behavior & Organization, 72(1), 408–424. doi:10.1016/j.jebo.2009.04.019.CrossRef

Smith, R. H., & Kim, S. H. (2007). Comprehending envy. Psychological Bulletin, 133(1), 46–64. http://www.ncbi.nlm.nih.gov/pubmed/17201570.

Staats, B. R., & Gino, F. (2012). Specialization and variety in repetitive tasks: Evidence from a Japanese Bank. Management Science,. doi:10.1287/mnsc.1110.1482.

Veblen, T. (1909). The limitations of marginal utility. Journal of Political Economy,. doi:10.1086/251614.

Wold, H. (1982). Soft modelling: The basic design and some extensions. In K. G. Jöreskog & H. O. A. Wold (Eds.), Systems under indirect observation: Part II(pp. 1–54). Amsterdam: North-Holland.

Wyer, R. S., & Budesheim, T. L. (1987). Person memory and judgments: The impact of information that one is told to disregard. Journal of Personality and Social Psychology, 53(1), 14–29. doi:10.1037/0022-3514.53.1.14.CrossRef

Title: An Experimental Investigation of the Impact of Absolute and Relative Inequalities on Individual Satisfaction
Author: Jérémy Celse
Publication date: 20-05-2016
Publisher: Springer Netherlands
Published in: Journal of Happiness Studies / Issue 4/2017
Print ISSN: 1389-4978
Electronic ISSN: 1573-7780
DOI: https://doi.org/10.1007/s10902-016-9757-6

Springer Professional

Abstract

Please log in to get access to your license.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Other articles of this Issue 4/2017

Psychological Well-Being as an Additional Outcome Parameter in the Treatment of Patients with Gambling Disorder: Results from a Clinical Multicenter Follow-Up Study

The Emotional Timeline of Unemployment: Anticipation, Reaction, and Adaptation

My Friends Are My Estate: Friendship Experiences Mediate the Relationship Between Perceived Responses to Capitalization Attempts and Happiness

Free to Be Happy: Economic Freedom and Happiness in US States

Gratitude and Athletes’ Life Satisfaction: The Moderating Role of Mindfulness

Income and Wellbeing in a Society on the Verge to Market Integration: The Case of the Tsimane’ in the Bolivian Amazon