Keeping Up with the Jones and Staying Ahead of the Smiths: Evidence from Suicide Data
- Presenter:
Chair: Thomas C. Buchmueller; Discussant: Sara Markowitz Tue June 6, 2006 8:00-9:30 Room 326
A growing theoretical literature posits that individuals’ happiness is a function of both absolute income and relative income. Empirical work on this issue is much more limited, generally relying on surveys of happiness or experimental economics. While such empirical studies point to a role for relative income in the utility function, the extent of inferences based on subjective data or the artificial (and nonrandom) environments of experiments is quite limited. Considering suicide as a revealed preference, we show theoretically how suicide data may be used to draw inferences on utility. We build a simple theoretical model of utility which depends on own income and income relative to a reference group. Suicide is treated as a choice variable reflecting one’s assessment of current and expected future utility. Within this model are nested a number of hypotheses that have been suggested in the theoretical literature on interdependent preferences and relative status. We take this model to a dataset containing suicide rates by county, gender, age, and race cells along with measures of absolute and relative income (by county) and numerous control variables thought to be related to suicide risk. We find strong support the notion that individuals look to others when evaluating their own utility and, in fact, care about the status of those above as well as those below them. Suicide risk for those near the middle of the income distribution rises as inequality in the upper tail (90/50 income ratio) rises. Consistent with a basic keeping-up with-the-Jones model, the suicide risk for the low income population rises with inequality in the lower tail (50/10 ratio). Importantly, we also find that individuals care about the income of those below them: suicide risk for the middle income population falls as inequality in the lower half of the income distribution (50/10) rises, while suicide risk for the high income population falls as inequality in the upper tail (90/50) rises. Overall, these results point to an important role for relative income in models of individual utility.
