Examining the indirect effect of income on well‐being via individual‐based relative deprivation: Longitudinal mediation with a random intercept cross‐lagged panel model

Abstract

Although the positive relationship between income and well‐being is well established, the psychological mechanisms underlying this process are less understood. One underexplored explanation is that objective wealth (or lack thereof) fosters relative comparisons, which, in turn, predicts well‐being. Extant work has, however, mostly focused on objective indicators of relative deprivation rather than on how people perceive their societal status. We address this oversight by examining the longitudinal indirect effects of income on well‐being via perceived individual‐based relative deprivation (IRD) using traditional and random intercept cross‐lagged panel models. Averaged across 10 annual assessments in a nationwide longitudinal panel sample of adults (N = 66,560), our results revealed reliable indirect effects of income on well‐being via IRD. Specifically, within‐person increases in income predicted within‐person decreases in IRD, which then predicted within‐person increases in personal well‐being over time. Our results replicated across robustness checks, including one using a general life satisfaction measure. We thus extend previous work by highlighting the need to consider one's perceptions of their relative societal position as a mechanism underlying the effects of income on well‐being over time.