Using the German Socio-Economic Panel, we analyze the relevance of modeling social comparisons to determine their effect on subjective well-being. We find that it is important to model social comparisons in such a way that captures the sensitivity of individuals to proximity. The impact on subjective well-being differs depending on the manner in which proximity is modeled, revealing that the underlying processes in comparisons are not homogenous along the income distribution. Additionally, our results point out that social and cultural capital modify the effect of social comparisons and such modification depends on the sensitivity to proximity.
