Relative to What or Whom? The Importance of Norms and Relative Standing to Well-Being in South Africa

SummaryStudies of relative standing and subjective well-being (SWB) consistently show a negative correlation between peer income and satisfaction. However, most investigate a single peer group in wealthy country. Using a South African household survey we model SWB using different measures of relative standing. Our results differ from most of the existing literature in two ways. First, they suggest that at low levels of income or expenditure—like most South Africans—the benefit of living among wealthier people outweighs the negatives of being the poorest of a peer group. In addition, we find achievement relative to one’s parents is more important than the traditional emphasis on geographic peers.