Relative Deprivation in Income, Assets, and Social Capital: Motivational and Deterrent Impacts on the Well-Being of Rural Youth

Abstract

Relative income deprivation is one mechanism through which income or wealth inequality is hypothesized to affect human behaviour, with consequences on well-being. The study checks these effects against multiple self-identified reference groups using a unique rich panel data set from Ethiopia, enabling us to examine a broader range of questions related to youth well-being than in previous studies in developing countries. In doing so, the study extends the standard analysis of relative deprivation (RD) from income per se, to consider social relative deprivation as well as assets (nonmonetary) relative deprivation. Since the effects of relative deprivation on well-being are also sensitive to the kind of measurements employed, the study employs two measurements of relative deprivation: objective and subjective, and compere the results from both. Our empirical results indicate relative income deprivation has a signal effect or a positive externality higher income of others in the reference group indicate higher prospects for youth (that induce motivation), whereas both social and non-monetary RD have a status effect higher income of others in the reference group reduces life satisfaction. Our findings are robust to different specifications. The policy implications of the results are discussed. Acknowledgement : The authors gratefully acknowledge the financial support for this research from the European Union Commission through the Food Secure project and the German Federal Ministry for Economic Cooperation and Development (BMZ) through DAAD. We are thankful to Ethiopian Strategy Support Program of the International Food Policy Research Institute for providing us the Baseline data. We are also very thankful to Prof Joachim von Braun for helpful comments and support in developing this paper. Above all, we are very grateful for the respondents for their kind cooperation and valuable time.