Effects of Objective and Subjective Income Comparisons on Subjective Wellbeing

In this article we present results from the Cape Area Panel Study investigating
how income comparisons affect the subjective well-being of young adults and parents.

The article builds on previous research in this area by studying whether an individual’s subjective
well-being depends on the comparisons they make, not only to those around them,
i.e., external comparisons, but to themselves across different time periods, i.e., internal
comparisons. In the comparisons, we use both objective and subjective measures of relative
income. Overall, we find strong evidence to suggest that income comparisons, both
relative to neighbours and relative to oneself, affect subjective well-being. Another
interesting observation is that, depending on the comparator, young adults and parents
differ in their perceptions of their own well-being. Furthermore, and as expected, we found
that objective, as well as subjective, measures of well-being influence well-being, but that
this is more prevalent in external than internal comparisons.