Working Paper: CEPR ID: DP4459
Authors: Armin Falk; Markus Knell
Abstract: A growing economic literature stresses the importance of relative comparisons, e.g., for savings and consumption or happiness. In this literature it is usually assumed that reference standards against which people compare themselves are exogenously given. In contrast, findings from social psychology suggest that people play an active role in determining their reference standards. We present a social comparison model where people choose their reference standards to serve motives of self-improvement and self-enhancement. The model predicts that reference standards increase in individuals? abilities and that people therefore tend to compare themselves to similar others. The results of a questionnaire study confirm the model?s prediction.
Keywords: goals; happiness; reference standards; social comparison
JEL Codes: D62; D63; H31; Z13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| individual ability (a) (D29) | reference standard (r) (R50) |