Why does Income Relate to Depressive Symptoms? Testing the Income Rank Hypothesis Longitudinally

Hilda Osafo Hounkpatin, Alex M. Wood, Gordon D. A. Brown, Graham Dunn

This paper reports a test of the relative income rank hypothesis of depression, according to which it is the rank position of an individual's income amongst a comparison group, rather than the individual's absolute income, that will be associated with depressive symptoms. A new methodology is developed to test between psychosocial and material explanations of why income relates to well-being. This method was used to test the income rank hypothesis as applied to depressive symptoms. We used data from a cohort of 10,317 individuals living in Wisconsin who completed surveys in 1992 and 2003. The utility assumed to arise from income was represented with a constant relative risk aversion function to overcome limitations of previous work in which inadequate specification of the relationship between absolute income and well-being may have inappropriately favoured relative income specifications. We compared models in which current and future depressive symptoms were predicted from: (a) income utility alone, (b) income rank alone, (c) the transformed difference between the individual's income and the mean income of a comparison group and (d) income utility, income rank and distance from the mean jointly. Model comparison overcomes problems involving multi-collinearity amongst the predictors. A rank-only model was consistently supported. Similar results were obtained for the association between depressive symptoms and wealth and rank of wealth in a cohort of 32,900 British individuals who completed surveys in 2002 and 2008. We conclude that it is the rank of a person's income or wealth within a social comparison group, rather than income or wealth themselves or their deviations from the mean within a reference group, that is more strongly associated with depressive symptoms.