Arbeitspapier

Income comparisons and non-cognitive skills

People gain utility from occupying a higher ranked position in the income distribution of the reference group. This paper investigates whether these gains depend on an individual's set of non-cognitive skills. Using the 2000-2008 waves of the German Socioeconomic Panel dataset (SOEP), a subjective question on Life Satisfaction, and three different sets of non-cognitive skills indicators, we find significant and robust differences across skills groups. People who are more neurotic, extravert and have low external locus of control and low negative reciprocity are more sensitive to their individual position in the economic ladder. By contrast, the Life Satisfaction reaction to changes in economic status is significantly lower among individuals who score high (low) in negative (positive) reciprocity, and are at the bottom of the distribution of neuroticism, extraversion. The heterogeneity on the importance of income comparisons needs to be taken into account when, for example, introducing them into economic models, predicting individuals' behaviour, or making welfare judgments.

Language
Englisch

Bibliographic citation
Series: SOEPpapers on Multidisciplinary Panel Data Research ; No. 441

Classification
Wirtschaft
Externalities
General Welfare; Well-Being
Subject
life satisfaction
income comparisons
personality traits
Zufriedenheit
Einkommensverteilung
Sozialer Status
Nutzen
Persönlichkeitspsychologie
Schätzung
Deutschland

Event
Geistige Schöpfung
(who)
Budria, Santi
Ferrer-i-Carbonell, Ada
Event
Veröffentlichung
(who)
Deutsches Institut für Wirtschaftsforschung (DIW)
(where)
Berlin
(when)
2012

Handle
Last update
10.03.2025, 11:42 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Budria, Santi
  • Ferrer-i-Carbonell, Ada
  • Deutsches Institut für Wirtschaftsforschung (DIW)

Time of origin

  • 2012

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