When information dominates comparison - Learning from Russian subjective panel data

We propose a micro-econometric evaluation of the relation between life satisfaction and income distribution, using a balanced panel survey of the Russian population, Russian longitudinal monitoring survey (RLMS), running from 1994 to 2000, covering 4685 individuals. We show that in the context of the very volatile Russian environment, Hirschman's [Q. J. Econ. 87 (1973) 544] tunnel effect conjecture seems to be confirmed: variables reflecting income distribution do not influence satisfaction through social comparisons; individuals rather seem to use their informational content in order to form their expectations. The reference group's income thereby exerts a positive influence on individual satisfaction, which contrasts with other studies on the subject. Inequality indices do not affect individual welfare. (C) 2003 Elsevier B.V. All rights reserved.