How Conscious Are You of Others? Further Evidence on Relative Income and Happiness

Abstract

Empirical evidence indicates that an individual’s happiness is relative with respect to income, whereby it increases with one’s own income and declines as the income of a reference group increases. Several recent studies further suggest that the effect of relative income is mediated by the extent to which people compare themselves with others. In line with the empirical research examining the effects of comparison intensity, in the present study, we focus on the degree to which people are conscious of others’ living standards (hereinafter, awareness of others) and aim to ascertain whether the intensity of awareness of others interacts with the individual perception of relative income in affecting the degree of happiness. By analyzing survey data pertaining to samples representative of Japan and the U.S., we find that individuals who are highly conscious of others are unhappier in Japan but happier in the U.S. Second, the positive relationship between awareness of others and happiness found in the U.S. results from the perception of reference-group income, in that highly conscious individuals compare downward. Lastly, we further examine the extent to which the integrated effect of awareness of others and reference-group income is related to an individual’s choice that could affect the degree of happiness. Our work intends to contribute to a better understanding of how different measures of reference income and respondents’ awareness of others interact in determining individual happiness and choice behaviors.