Keeping up with Joneses and Social Mobility in Russia

The purpose of the present paper was to derive the importance of relative labor income position on upward income mobility in Russia on the basis of survey data of RLMS for 2011 and 2014 years. Our hypothesis was that the low relative wage income compared to the reference group should encourage individual to work harder and increase his or her relative income in order to increase welfare. On the basis of both previous empirical researches as well as sociologic and economic theories we developed a model, which we tested using OLS multivariate approach. We were trying to improve the specification of the model by controlling for a number of important life cycle events, which could significantly affect the strategy of individual. Unlike most papers, which were more interested in the broad concept of mobility, we were concentrating on the individual income transitions and the motivations behind it. We begin our analysis with the discussion of KUJ theory and its implications in explaining the financial motivation of individuals. Relying on the experience of previous works on income mobility, we derived the most appropriate measure of individual income and income mobility, the dependent variable in our research. Taking into account the results of previous mobility studies, we included a number of control variables which were aimed to control for various motivations of individual behind the income increase, like important life events and household characteristics changes. The result of statistical analysis showed that the relative labor income indicators were negatively dependent on income transition, given the controlling variable of equivalent income in 2011 and other life event and demographic indicators. Namely, we derived that individual who earned relatively low wage compared to the average level of people of the same age, education, gender, professional group, experienced higher income transition. This result confirmed our initial hypothesis.