LOCAL STATUS AND NATIONAL SOCIAL WELFARE

Perceptions of individual well-being are influenced by local status, i.e., one's place in the income distribution of one's reference group. In general, reference groups are smaller than the entire nation. If national social welfare is an aggregate of individual's well-being, then it is not symmetric with respect to all individuals. A geographical interpretation of reference groups means that the welfare of a family living in one region is only influenced by other families in that region. An empirical application, using states, shows that a Gini index modified to reflect local status showed much less improvement 1949-1979 than did the standard Gini.