Relative Income, Community Attachment and Subjective Well–Being: Evidence from Japan

Abstract

Income is one of the most important and well–studied determinants of subjective well–being (SWB), and empirical evidence indicates that there is a robust positive income effect on measures of SWB. However, evidence from previous studies is inconclusive regarding the impact of relative income on reported well–being. In this study, we use original Japanese survey data collected in 2015 and reference area income derived from 500 m mesh data to examine the impact of relative income on life satisfaction. The results of structural equation modeling reveal that relative income has a direct negative impact but an indirect positive effect through community attachment on life satisfaction. This suggests that the negative effects of reference income observed in previous studies that did not consider community attachment are likely to be overestimated. Our results also suggest that younger people are more affected by the direct negative effect of reference income than people in other age groups. Furthermore, people with a household income higher than the reference area income are not necessarily more attached to their neighborhood; however, they are more likely to report higher life satisfaction.