Absolute income, comparison income and subjective well-being in a transitional country: Panel evidence from Vietnamese household surveys

Abstract

Using panel data, this study is the first to offer an empirical analysis of the effect that absolute income and three specifications of comparison income have on individual happiness in a transitional country. We use unique data from the Viet Nam Access to Resources Household Survey (VARHS) in three cycles (2012, 2014, and 2016), including a representative sample of 6,575 respondents from 12 provinces in rural areas in Vietnam. Taking advantage of panel data, we use a fixed-effects regression approach to control for individual unobservable heterogeneity. The approach taken in this paper divides subgroups according to relative income instead of absolute income. This analysis allows the elimination of opposing relations to see the same direction effect of social comparison income on individuals’ happiness The results reveal that individuals compare themselves to more than one reference group, and compare themselves both with those better off and those worse off. Nevertheless statistically significant results only attain when one outweighs the other or when they both look downward or upward in their comparison. Interestingly, the outcome turns from asymmetry to near symmetry when the reference group’s interaction effects change from opposed to the same.