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n African Review of Economics and Finance - Subjective well-being, reference groups and relative standing in post-apartheid South Africa

Volume 7, Issue 1
  • ISSN : 2042-1478
  • E-ISSN: 2410-4906

Abstract

Previous studies on the determinants of subjective well-being concur on the importance of relative income, i.e., the fact that individuals' subjective well-being is dependent on how well they are doing in relation to their reference group. Using South African data from 1993, Kingdon and Knight (2006, 2007) found that in apartheid South Africa, reference groups were mostly divided along racial lines, i.e., individuals' relative income within their specific race group was significantly correlated with their subjective well-being. In this article, the methodology of Kingdon and Knight is repeated using data from the first wave of the National Income Dynamics Study (2008), in order to explore whether these reference groups have shifted in post-apartheid South Africa. The findings suggest that race-specific relative income is no longer significantly correlated with subjective well-being for the South African population as a whole, but rather that perceived relative income within the country matters as a significant predictor of subjective well-being. These results seem to be in line with the hypothesis of reference groups shifting away from a racial delineation to a more inclusive one, subsequent to the racial integration which took place after 1994. However, for a sub-population within South Africa, namely those below the poverty line (who are mostly black), a race-specific reference group remains relevant. The article provides potential reasons for why this is the case.

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/content/aref/7/1/EJC173490
2015-06-01
2019-10-23

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