Relative Income, Temporary Life Shocks and Subjective Wellbeing in the Long-run

We show how the concepts of remembered utility and experienced utility correspond to cognitive appraisals of life satisfaction and emotion/affect respectively, as these concepts are used in psychology. Cognitive life satisfaction, or remembered utility, is relatively stable over time and can be considered as reflecting subjective wellbeing in the long-run. Emotion/affect, or experienced utility, is a transitory phenomenon and can be considered as reflecting subjective wellbeing in the short-run. Using the personal wellbeing index (PWI) to measure cognitive life satisfaction, or remembered utility, and the Positive and Negative Affect Schedule (PANAS) to measure emotion/affect, or experienced utility, we examine how income relative to one’s comparator group and variations in short-run subjective wellbeing, effect subjective wellbeing in the long-run. We do so for the Korean minority in China, a population that is undergoing rapid change in a fast moving transitional economy.