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Economic choices and status: measuring preferences for income rank

Mujcic, Redzo and Frijters, Paul (2012) Economic choices and status: measuring preferences for income rank. Oxford Economic Papers, 65 (1). pp. 47-73. ISSN 0030-7653

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Identification Number: 10.1093/oep/gpr065

Abstract

We report on the trade-offs that 1,068 Australian university students make between absolute income and the rank of that income in hypothetical income distributions. We find that income rank matters independently of absolute income, with greater weight given to rank by males, migrants, and individuals from wealthy families. Rank-sensitive individuals require as much as a 200% increase in income to be compensated for going from the top to the bottom of the income distribution. Migrants residing abroad for longer periods of time, and with more affluent job titles, are more likely to compare themselves to others at the destination. A dynamic choice model of compensating incomes predicts the average respondent to need a permanent increase in income of up to $10,000 (70%) when moving from a society with a mean income of $14,000 (e.g., Mexico) to a society with a mean income of $46,000 (e.g., the USA).

Item Type: Article
Official URL: https://academic.oup.com/oep
Additional Information: © 2012 Oxford University Press
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
JEL classification: C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior
J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J61 - Geographic Labor Mobility; Immigrant Workers
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 08 Feb 2018 09:56
Last Modified: 20 Apr 2021 02:22
URI: http://eprints.lse.ac.uk/id/eprint/86685

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