Conference Paper Health. Happiness. Inequality
Income Comparisons among Neighbours and Life Satisfaction
04 Jun 2010
This paper uses data from the German Socio-economic Panel Study (SOEP) matched with micro-marketing indicators of population characteristics at different geographical scales to investigate whether peoples’ relative income position in the neighbourhood matters for their life satisfaction. In particular, we ask whether people compare their lot more with the people who live on the same street or with those living in the wider area. We find a negative effect of neighbourhood income on life satisfaction that is consistent with the relative income hypothesis. The effect is slightly more marked both the more immediate the neighbourhood context is measured and when people live on small residential streets. These places have been suggested to be places where close bonds exist between people. This suggests that the relative income effect may only operate in the very immediate neighbourhood, and in places where neighbours may actually be aware of their changing relative income position.