No. 98: Keeping up with the Joneses and the Easterlin Paradox

Jahr: 2022
Typ: Working Paper
Open Science:


This paper analyses the relationship between relative income concerns and individual wellbeing in an economy of heterogeneous firm-worker pairs. Specifically, we study incentive contracting under moral hazard when workers compare their earnings with the economy’s average wage. At the aggregate level, we define the economy’s equilibrium and prove existence. We then analyse the impact of technological improvements and identify various channels through which an individualŠs wellbeing can be negatively affected by economy-wide income growth, to the extent that, consistent with the Easterlin Paradox, an increase in average earnings can result in stagnant or even reduced average expected utility for workers.

Beteiligte Institutionen

Die Hauptstandorte vom TRR 266 sind die Universität Paderborn (Sprecherhochschule), die HU Berlin und die Universität Mannheim. Alle drei Standorte sind seit vielen Jahren Zentren für Rechnungswesen- und Steuerforschung. Hinzu kommen Wissenschaftler der LMU München, der Frankfurt School of Finance and Management, der WHU – Otto Beisheim School of Management, der ESMT Berlin und der Goethe-Universität Frankfurt, die die gleiche Forschungsagenda verfolgen.