Frustrated Achievers: Winners, Losers, and Subjective Well Being in New Market Economies

To date the literature on subjective well being has focused on the developed economies. We provide empirical evidence from two emerging market countries, Peru and Russia. Our results—and in particular a strong negative skew in the assessments of the respondents with the greatest income gains—support the importance of relative rather than absolute income differences. Among other factors, we attribute our results to shifts in reference norms and to macroeconomic volatility. Relative differences seem to matter more for those in the middle of the distribution than for the very wealthy or the very poor. Our respondents were more critical in assessing their progress vis-à-vis others in their country versus those in their community. The large and consistent gap we find between objective income trends and the subjective assessments of the upwardly mobile may have implications for the future economic and political behavior of a group that is critical to the sustainability of market policies. * The authors are, respectively, Senior Fellow and Co-Director, Center on Social and Economic Dynamics ([email protected]), and Senior Research Analyst, Economic Studies Program ([email protected]), at the Brookings Institution. The authors acknowledge generous support for this research from the John D. and Catherine T. MacArthur Foundation and from the Tinker Foundation. They also thank Alan Angell. Martha Merritt, Guy Pfeffermann, and Peyton Young for helpful comments on this paper, as well as Andrew Oswald for comments on an earlier version of this work.