Subjective well-being and reference-dependence: Insights from Mexico
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- Castilla, C. J Econ Inequal (2012) 10: 219. doi:10.1007/s10888-012-9222-7
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Data from Mexico are used to examine whether two indicators of subjective well-being—income satisfaction and income adequacy—correlate not only with the respondent’s absolute level of income, but also with their assessment of how their income compares relative to the income of a reference group, the level of income they hoped to have achieved by that stage of their life, and the income they had three years earlier. Both subjective well-being indicators correlate positively with the ranking relative to all three reference points. Some of the findings differ across segments of the income distribution. Subjective well-being assessments of the poor are influenced more by the inability to achieve income aspirations, while differences with respect to others is a more prominent factor among non-poor respondents.