Do social comparisons and negative shocks affect the subjective well‐being of the poor? Evidence from the Peruvian Amazon

AbstractThis paper contributes to the literature by testing the effect of a household's relative position on its subjective well‐being. Our results show that both self‐perceived status and relative income have significant effects on the subjective well‐being of households located in the Peruvian Amazon. The paper also considers negative random shocks and shows that non‐agricultural shocks have a negative effect on subjective well‐being. These results imply that public policies aimed toward the improvement of rural households' well‐being in the Peruvian Amazon should look beyond poverty reduction and consider also the positive effects that inequality reduction can have on subjective well‐being.