Effects of Objective and Subjective Income Comparisons on Subjective Wellbeing

Abstract

We present results from the Cape Area Panel Study dataset investigating how social comparisons with regard to income affect subjective wellbeing of both young adults and parents. Objective and subjective measures of relative income are used, assessing how individuals compare themselves to others and to themselves over time. Strong evidence is found to suggest that social comparisons affect subjective wellbeing, both relative to neighbours and relative to oneself in the past. Objective measures of wellbeing also influence happiness, but this is more prevalent in interpersonal than inter-temporal comparisons. It is possible that some adaptation does occur within individuals over time.