Climbing up the Social Ladders: Identity, Relative Income, and Subjective Well-being

This study incorporates the concept of identity to explain the relationship between relative income and subjective well-being. Based upon the theoretical framework of an identity model developed by Akerlof and Kranton Q J Econ 115:715–753, (2000), the empirical findings of this study suggest that an increase in relative income leads to a gain in positional identity and therefore raises the level of subjective well-being. This approach extends our understanding about the connection between positional concern and subjective well-being and explains the importance of social comparison in shaping individuals’ preferences and tastes. People are concerned about their relative income as it represents a positional identity of social status, dependent upon ideals and norms derived from the interactions between an individual and others within a society.