Happiness and Comparison Income: Evidence from Canada

Abstract

Using data from the Canadian National Population Health Survey (1994–2009), this study examines the relationship between comparison income and individual happiness. This study utilizes two definitions of comparison income: Average income of the reference group and the difference between one’s own household income and the average income of the reference group. The estimations using the Ordered Probit Method suggest that an increase in the average income of the reference group reduces individual happiness. On the other hand, an individual’s happiness increases when his/her own household income becomes larger in comparison to the average income of the reference group. To check the robustness of these results, this study re-estimated all models using a different composition of the reference group. However, the basic results still hold, thus confirming that comparison income has a significant negative impact on an individual’s happiness level.