Beyond the Joneses: Inter-country income comparisons and happiness

• Countries, and not just group of peers, are reference groups in relative income effects.
• Life satisfaction is negatively affected by top income neighbouring countries.
• The neighbouring country effect depends on the intensity of media exposure.
• We identify a sociological driver (country comparisons) of migration.

Our paper provides novel evidence on the burgeoning literature on life satisfaction and relative comparisons by showing that in the last 30 years comparisons with the well being of top income neighboring countries have generated negative feelings on a large sample of individuals in the Euro barometer survey. The paper shows that neighboring countries, and not just our individual neighbors or peers, can be reference groups and that the above mentioned effect depends on the intensity of media exposure.