16-01-2012
Seminario CRES
Abstract:
This paper focuses on the understanding of the effect of relative income on health. Traditionally, relative income was expected to have a negative association with individual health by means of negative psychological effects. However, the empirical evidence is not conclusive. In order to explain the results disparity in previous literature, I use new evidence regarding the effect of income comparisons within a reference group on well-being. Using German Socio-Economic Panel data (SOEP), I analyse whether income comparisons affect health through psychological well-being in different directions, depending whether the comparisons are "upwards" or "downwards", and not only through relative deprivation, as it was suggested initially. In addition, income endogeneity, due to omitted variables, have been tackled considering unobserved heterogeneity after a POLS transformation. The results show that relative income is more important for health than absolut income. Both “upwards" and "downwards" comparisons are significantly associated with health.
As we are providing light lunch, please contact natalia.pascual@upf.edu to confirm your assistance.
Natàlia Pascual
CRES researcher
Offfice 23.111 Ext. 1586
natalia.pascual@upf.edu