Reference Group Income and Subjective Well-Being: Empirical Evidence from Low-Income Transition Economies
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This paper aims at studying the connection between reference group income and life satisfaction in the three republics of the South Caucasus: Armenia, Azerbaijan, and Georgia. I illustrate that in low-income transition economies individuals make not only upward comparisons, decreasing their subjective well-being if the reference group members are richer than they are, but also downward comparisons, enhancing their subjective well-being if the reference group members are poorer. This result contradicts Duesenberry’s idea that comparisons are mostly upward.
KeywordsSubjective well-being Reference group Transition economy Upward comparison Downward comparison
JEL ClassificationsD60 D63 I31 P30
I am grateful to two anonymous referees and to Monica Shahmenendyan at CRRC Armenia. Financial support from Emerging Fields Initiative at the University of Erlangen-Nuremberg is gratefully acknowledged.
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