How much do people care about relative income? A lot.

I was reading this article when I came across this:

“By regression 2, half of the individuals in our sample would be as happy with an increase in her absolute income of 19.78 percent or less, while the incomes of all others in her country remained fixed, as they would with a doubling of the incomes of themselves and all others. One quarter of them would be indifferent between an increase of 15.96 percent or less in only their absolute incomes and a doubling of their and everyone’s absolute incomes; for three quarters of them, an increase of only their absolute incomes by 23.51 percent or less would be equivalent to a doubling of theirs and everyone else’s absolute incomes. No individual would require more than a 37.79 percent increase in her absolute income alone to increase her happiness by as much as a doubling of the absolute income of herself and all others.”

In other words, in terms of personal happiness, the median person would be happier with a 20% increase in income, than with their income doubling and everyone’s income doubling!

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s