Is Feeling Richer More Important Than Being Richer?
Abstract: Using data from the European Quality of Life Survey, this thesis aims to add to the literature on the effects of income on well-being, by not only examining the relationship between well-being and relative income in 34 European countries but by primarily focusing on people's perceived economic position and its role in well-being. The four main results are: (1) Most people view themselves as being neither worse nor better off than others in their country. (2) Perceiving oneself worse off is associated with lower well-being while perceiving oneself better off is associated with higher well-being. The association is much stronger between well-being and the perception of being worse off. (3) Relative income matters more to people's well-being than absolute income, which is in line with previous research. (4) When estimating models where both perceived and actual relative economic position is included, it can be seen that people's perceived position has a significantly stronger association with well-being, compared with their actual economic position.
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