Description:
This paper proposes that individuals
care about the relative income of proximate reference
groups. Making use of self-reported life satisfaction as a
proxy for unobservable utility, the relative income of
siblings is tested for relevance as a reference point for
new sample data from Venezuela. Having greater perceived
income than one's siblings is found to be positively
linked to individual life satisfaction. This evidence
supplements the scarce economic research on reference
groups, supporting the hypothesis that individuals with
proximate characteristics and resembling opportunities in
life serve as points of comparison.