What explains life satisfaction? Relative income or rank income? The case of Ecuador

ABSTRACT

We test whether various measures of relative income and rank income hypothesis explain life satisfaction in Ecuador. We found robust evidence that the rank position of the income within the reference group explains life satisfaction. In contrast, the effect of relative income measures on happiness is sensitive to the variables used to construct the reference group.

KEYWORDS:

• Relative income
• rank
• life satisfaction
• happiness
• Ecuador

JEL CLASSIFICATION:

• I31
• D60

Disclosure statement

No potential conflict of interest was reported by the authors.

Data availability statement

https://doi.org/10.6084/m9.figshare.12991403.v1

Notes

¹ For Western European countries.

² For Eastern European countries.

³ The higher the Yitzhaki index, the higher the gap between the actual income with the reference group income.

Additional information

Funding

We acknowledge the training received from the University of Malaga PhD Program in Economics and Business [Programa de Doctorado en Economía y Empresa de la Universidad de Malaga].