When Information Dominates Comparison: A Panel Data Analysis Using Russian Subjective Data

Abstract

We propose a micro-econometric investigation into the relation between subjective life satisfaction and income distribution, using a balanced panel survey of the Russian population (RLMS), running from 1994 to 2000, including 4096 individuals. We show that in the context of the Russian very volatile environment, Hirschman’s (1973) “tunnel effect” conjecture seems to be validated : variables reflecting income distribution do not influence satisfaction through social comparisons; individuals rather seem to use their informational content in order to form their expectations. The reference group’s income exerts a positive influence on individual satisfaction, which contrasts with other studies on the subject. Inequality indices do not affect individual welfare.