The Journal of Economic Inequality

, Volume 7, Issue 3, pp 225–248

How important is rank to individual perception of economic standing? A within-community analysis

Article

DOI: 10.1007/s10888-008-9076-1

Cite this article as:
Powdthavee, N. J Econ Inequal (2009) 7: 225. doi:10.1007/s10888-008-9076-1

Abstract

Using the Indonesia Family Life Survey data, this paper is the first of its kind to explore empirically whether rank-position within one’s community matters to individual perception of where he or she stands on the self-defined economic ladder. By applying a multi-level modeling equation approach on responses to the subjective economic ladder (SEL) question, I find that it is not the mean income or expenditure of a reference group that affects SEL but rather the individual’s ordinal ranking within a reference group (for example, the individual is from the 5th or 40th richest household in the community). Consistent with Hirsch (Hirsch, F.: Social limitation to growth. Harvard University Press, Cambridge (1976)), SEL depends significantly more on the rank-position of the positional goods and less on the nonpositional goods owned by the individual.

Keywords

Subjective economic ladder Rank Range frequency theory Positional goods Inequality 

JEL

D62 I1311 

Copyright information

© Springer Science+Business Media, LLC. 2008

Authors and Affiliations

  1. 1.Bedford Group, Institute of EducationUniversity of LondonLondonUK

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