Working Paper: NBER ID: w23615
Authors: Nicolas L. Bottan; Ricardo Perez-Truglia
Abstract: Do individuals care about their relative income? While this is a long-standing hypothesis, revealed-preference evidence remains elusive. We provide a unique test by studying residential choices: individuals often must choose between places with different income distributions, and as a result they “choose” their relative income. We conducted a field experiment with 1,080 senior medical students who participated in the National Resident Matching Program. We estimate their preferences by combining choice data, survey data on perceptions and information-provision experiments. The evidence suggests that individuals care about their relative income and that these preferences differ across single and non-single individuals.
Keywords: relative income; residential choices; field experiment; medical students; social status
JEL Codes: D62; D91; I31; Z13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| relative income preferences (D11) | residency program choice (I23) |
| earnings rank increase (J31) | residency program choice (I23) |
| cost of living increase (J30) | residency program choice (I23) |
| relative income preferences (D11) | cost of living acceptance (C82) |
| relationship status (J12) | preference for affluent areas (R20) |
| relationship status (J12) | preference for less affluent areas (R20) |