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Influence of income comparisons on well-being under different macroeconomic conditions. “Tunnel effect” in Russia

Researchers: Ekaterina SELEZNEVA

In this paper I examine whether the “tunnel effect” was an intrinsic feature of two different periods of transition in Russia: recession (1994-1998) and growth (2000-2004). Making use of the panel data nature of the Russian Longitudinal Monitoring Survey, linear and non-linear estimation strategies are applied for modeling the individual well-being measured by self-reported levels of satisfaction with life. Two definitions of the reference group are formulated, involving the average level of household expenditures, and individual monthly income for a person with similar professional and personal characteristics. I find a robust evidence of the “tunnel effect” driven by the individual level comparisons for men over the whole period in consideration, while for the women it is true only during the economic growth. Conclusions on the role of the household level comparison are ambiguous.