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Citation Information

Type Working Paper
Title Friends and neighbors of the poor: Testing for relative deprivation in a developing country
Publication (Day/Month/Year) 2005
URL http://siteresources.worldbank.org/INTSARREGTOPLABSOCPRO/34004324-1145382108227/20895925/FriendsAndN​eighborsOfThePoor.pdf
Theories of relative deprivation predict negative welfare effects when friends and neighbors become better-off. Other theories of social interaction point instead to likely positive benefits. We encompass both views within a single model, which motivates our empirical tests using a survey for Malawi that collected data on satisfaction with life, own economic welfare and the perceived welfare of friends and neighbors. The results suggest that relative deprivation is generally not a concern for poor people, although it does matter at relatively high levels of living. Our results offer a welfarist explanation for the priority given to absolute poverty in poor countries.

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