Do social comparison effects exacerbate children’s subjective experiences of poverty? Research on relative income effects indicates that reference groups are relevant to an individual’s well-being. While these effects are rather well understood for adults, it is unclear whether children are affected in a similar way. In our analysis, we investigate if children in low-income families perceive the economic situation in their home differently if they live in a wealthy (as compared to a disadvantaged) neighborhood. Drawing on parent and child data from the German Family Panel pairfam (3600 observations from 1691 dyads) enriched with district-level neighborhood data, we analyze the association between neighborhood socioeconomic status and children’s perceptions of the financial situation in their home. Controlling for a number of indicators for the economic situation in the family such as household income, social welfare benefits, and parents’ perception of family finances, we find that children from low-income families feel less deprived if they are living in neighborhoods with a higher socioeconomic status. In contrast, for children from families with an equivalence income above the median regional equivalence income no neighborhood effects are found.
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Poor individuals, however, may be affected more by social comparison effects as social comparison is asymmetric, i.e. individuals “look upward” when making comparisons (Duesenberry 1949). Clark and Senik (2010) find that for people in low-income households it is more important to compare their income with other people’s incomes. Similarly, Boyce et al. (2010) find that individuals compare themselves more often to those socially above them than to those below when investigating income-rank effects in the British Household Panel Survey.
While we find neighborhood effects for the children in our sample of families, analogous analyses for these children’s parents did not yield significant results regarding neighborhood effects. We ran regressions similar to those shown in Table 2, but with parent’s perspective on household economic deprivation as the dependent variable and parent’s age and gender instead of child’s age and gender. Coefficients capturing neighborhood effects were not significant. An explanation for this finding could be that the immediate neighborhood is a too narrow area for adults’ social comparison, or in particular, that adults have more knowledge regarding the ‘true’ economic situation of their household and thus do not have to rely on clues such as their living environment.
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This paper uses data from the German Family Panel pairfam, coordinated by Josef Brüderl, Karsten Hank, Johannes Huinink, Bernhard Nauck, Franz Neyer, and Sabine Walper. pairfam is funded as long-term project by the German Research Foundation (DFG).
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Huyer-May, B., Schmiedeberg, C. & Schumann, N. Neighborhood Effects on Children’s Subjective Deprivation: Are Poor Children’s Perceptions of the Economic Situation in their Home Influenced by their Neighborhood?. Child Ind Res 11, 291–305 (2018). https://doi.org/10.1007/s12187-017-9445-z
- Neighborhood effects
- Social comparison
- Subjective deprivation
- Child poverty