The Happiness and Relative Income Hypothesis in Contemporary Japan : A Study of Lifestyle and Values

Previous studies have argued that higher reference income not only triggers feelings of envy, but also serves to signal ambition and bright future prospects; the relative importance of envy ("comparison effect") and ambition ("information effect") depends on both the degree of mobility in one's life stage and the reference group. Although the Japanese labor market and society are relatively immobile, individuals in the early part of their lives are more mobile and likely to have opportunities to change their career and residence than they will later in their lives. Thus, using a nationally representative individual-level data set from Japan, this study examined how reference income affects individual life satisfaction (LS) in both early and later life. We found that there was a significant negative association between LS and average income of the demographic reference group in the later life sample, but no association in the early life sample. Our findings suggest that the relative importance of comparison and information effects in Japan depend on the degree of mobility in one's life stage; specifically, the information effect from ambition cancels out the comparison effect in early life, while the comparison effect dominates the information effect in later life.