Subjective Well-Being and Relative Deprivation: An Empirical Link

Abstract

This paper explores the relationship between two well-established con-cepts of measuring individual well-being: the concept of happiness, i.e. self-reported level of satisfaction with income and life, and relative deprivation/satisfaction, i.e. the gaps between the individual's income and the incomes of all individuals richer/poorer than him. Operationalizing both concepts using micro panel data from the German Socio-Economic Panel, we provide empirical evidence for subjective well-being dependingmore on relative satisfaction than on absolute levels of income. This finding holds even after controlling for other influential factors in a multivariate setting.