Higher inequality and comparison effects on welfare

Income inequality is associated with stronger social comparison effects: The effect of relative income on life satisfaction, Cheung, Felix; Lucas, Richard E.

Abstract

Previous research has shown that having rich neighbors is associated with reduced levels of subjective well-being, an effect that is likely due to social comparison. The current study examined the role of income inequality as a moderator of this relative income effect. Multilevel analyses were conducted on a sample of more than 1.7 million people from 2,425 counties in the United States. Results showed that higher income inequality was associated with stronger relative income effects. In other words, people were more strongly influenced by the income of their neighbors when income inequality was high. (PsycINFO Database Record (c) 2016 APA, all rights reserved)

Journal of Personality and Social Psychology, Vol 110(2), Feb 2016, 332-341.

I’m shocked, shocked that greater inequality produces all this envy. It’s almost as if those promoting inequality are practicing class war!

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paul frijters
paul frijters
5 years ago

shocking indeed! It’s a worthwhile point to keep banging on about. Wealth inequality is now enormous in the US. I wouldn’t be surprised if its worse than in the feudal era of Europe. And we all know what that lead to.

suburbanite
suburbanite
5 years ago

For those of us who aren’t economists – Does inflation targeting monetary policy built around independent central banks lead to greater inequality? It seems that whether or not it was the intended effect this seems to be the outcome.

paul frijters
paul frijters
5 years ago
Reply to  suburbanite

well, I don’t think the targeting per se is the bit about monetary policy that increases inequality. Having private money creation certainly is much more of a biggie, as well as quantitative easing in the US and the EU via effectively transferring public resources to private bank. The oligopoly in the mortgage and SME lending markets is a biggie in Australia.

So it’s IMO not about the existence of an inflation target. Rather it is about the whole monetary sector and its regulation.

Grumpy Racist Homophobe
Grumpy Racist Homophobe
5 years ago

I’m very rich. My house is worth over 1 million dollars. …and I don’t owe a cent on it. So I feel vastly superior to the tenants next door.

Grumpy Racist Homophobe
Grumpy Racist Homophobe
5 years ago

…but then the neighbours over the road have just knocked down their house and built a 21st century mansion on it. The property is now worth over 2.5 million dollars. The government must prohibit this sort of thing because it makes me feel inadequate.