Working Paper: NBER ID: w21998
Authors: Hitoshi Shigeoka; Katsunori Yamada
Abstract: Economists have long been aware of utility externalities such as a tendency to compare own income with others'. If welfare losses from income comparisons are significant, any governmental interventions that alter such attitudes may have large welfare consequences. We conduct an original online survey of discrete-choice questions to estimate such attitudes in the US and the UK. We find that the UK respondents compare incomes more than US respondents do. We then manipulate our respondents with simple information to examine whether the attitudes can be altered. Our information treatment suggesting that comparing income with others may diminish welfare even when income levels increase makes UK respondents compare incomes more rather than less. Interestingly, US respondents are not affected at all. The mechanism behind the UK results seems to be that our treatment gives moral license to make income comparisons by providing information that others do so.
Keywords: income comparison; utility externalities; discrete-choice experiments; US; UK
JEL Codes: C9; D1; D3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| UK respondents exhibit stronger income-comparison attitudes than US respondents (D12) | Difference in jealousy levels between the two countries (F52) |
| Information treatment provided to UK respondents (C83) | Increase in their income-comparison attitudes (D11) |
| Treatment gives moral license to make income comparisons (A13) | Observed increase in jealousy among UK respondents (Z13) |
| Information treatment (L96) | No effect on US respondents' income-comparison attitudes (F61) |