Is relative deprivation beneficial? The effects of richer and poorer neighbors on children's outcomes

This study investigates the effects of a child's family income relative to the income of his or her neighbors. Relative deprivation theory predicts that having less than others in your reference group leads-to negative psychological and behavioral outcomes. In contrast, theories of neighborhood resources predict that affluent neighbors are a valuable asset for children, even if such neighbors make children feel deprived. I define relative advantage as the income gap between children and their lower-income neighbors and find that it has no effect on their test scores, selfesteem, or behavior. In contrast, relative disadvantage (the income gap between children and their higher-income neighbors) has a positive and significant effect on these outcomes, including selfesteem. This analysis distinguishes between the number of higher-income families and the magnitude of their income advantage, and it addresses the potential influence of selection bias. (C) 2002 Wiley Periodicals, Inc.