Overview

Abstract (English)

In this paper, I seek to understand the importance of absolute (personal) income versus income relative to one’s neighbours in determining the level of one’s life satisfaction. For this purpose, I use sample data of 9,482 individuals with incomes higher than $5,000 from the 2005 Canadian General Social Survey. I find that personal income is positively associated with one’s level of life satisfaction whereas the income of neighbours (relative income) has the opposite effect and to a larger extent. My findings indicate that increasing income of Canadians from the current levels may not provide additional improvements to life satisfaction. A possible policy implication may be that raising taxes may have no negative effect on life satisfaction of CanadiansIn this paper, I seek to understand the importance of absolute (personal) income versus income relative to one’s neighbours in determining the level of one’s life satisfaction. For this purpose, I use sample data of 9,482 individuals with incomes higher than $5,000 from the 2005 Canadian General Social Survey. I find that personal income is positively associated with one’s level of life satisfaction whereas the income of neighbours (relative income) has the opposite effect and to a larger extent. My findings indicate that increasing income of Canadians from the current levels may not provide additional improvements to life satisfaction. A possible policy implication may be that raising taxes may have no negative effect on life satisfaction of Canadians.

Abstract (French)

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