Which Reference Groups Matter and How? A Relative Income Information Experiment with Administrative Data
: Xu, Xiaogeng; Metsälampi, Satu; Kirchler, Michael; Kotakorpi, Kaisa; Matthews, Peter Hans; Miettinen, Topi
Publisher: American Economic Association
: 2025
American Economic Journal: Applied Economics
: 1945-7782
: 1945-7790
: https://www.aeaweb.org/articles?id=10.1257/app.20240181
Received wisdom holds that income rank matters for life satisfaction, but causal evidence on the nature and impact of income comparisons is limited. We randomize individuals from a representative sample of mid-career Finns to receive personal rank information from one of several reference groups. We find strong
evidence of the effect of rank information on income satisfaction, but weaker effects on life satisfaction, and some evidence of real effects in experimental and administrative data. Effects are strong in narrow reference groups and weak and insignificant in the national one. Finally, we discuss the implications for income transparency policies.
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We acknowledge the financial support from The Academy of Finland, project (grant no. 332550), Finnish Centre of Excellence in Tax Systems Research / Academy of Finland (grant no. 346250), the Austrian Science Fund (FWF, project SFB F6310), Finnish Cultural Foundation (grant no. 00210723) and the Yrj¨o Jahnsson Foundation (grant no. 20177011).
