The Neighbour’s Effect on well-Being: How Local Relative Income Differentials Affect Resident's Subjective Well-Being

Abstract

Studies relating income to subjective well-being have found that both absolute and relative income determine individual well-being. This paper assesses the effect of relative income on subjective well-being, and the spatial scale on which this comparison takes place. This study employs spatial data on individual well-being, health, socio-economic status, and psychometrics. The findings suggest that relative income is a significant predictor of subjective well-being. The relationship is negative for high-income households, but absent or reversed for low income households showing an asymmetric relationship. The spatial scale for the comparison effect is small, with a bandwidth of 100 metres providing the best fit.