Using the German Socio-Economic Panel, we analyze the importance of modeling social comparisons to determine their effect on subjective well-being. The first contribution is the consideration of social comparison measures, which assume that individuals compare themselves to each and all the other individuals along the income distribution and where proximity is a crucial issue in the comparisons. The second contribution is the inclusion of social contacts and values as an influence on the effect of social comparisons on subjective well-being. Interestingly, our results confirm that individuals’ subjective wellbeing is affected by their comparisons with others above and below themselves in the distribution, and the relevant role of proximity. Additionally, we conclude that social and cultural capital modify the effect of social comparisons and proximity on subjective well-being.
