The role of proximity in social income dynamic comparisons and well-being

The present study investigates the role of proximity in shaping social income static and dynamic comparisons and their impact on well-being, measured in terms of self-assessed health. Using the Spanish Survey of Household Finances (2002-2017), the study examines how individuals compare their income trajectories with those of their peers, considering varying degrees of proximity. The findings reveal that well-being is negatively impacted by static comparisons only in the case of a significant income gap with richer individuals. However, when dynamic comparisons are introduced, individuals experience an improvement in their subjective well-being when comparing to individuals who previously earned more but now earn less, as long as they drop at a certain distance. Consequently, no effect is observed when comparing with individuals in closer proximity, and effects emerge when the degree of proximity is low.