Income and neighbourhood‐level inequality predict self‐esteem and ethnic identity centrality through individual‐ and group‐based relative deprivation: A multilevel path analysis

Although income and inequality (objective measures of deprivation and the distribution of income within a defined area, respectively) predict people's self‐appraisals, the psychological mechanisms underlying these relationships are largely unknown. We address this oversight by predicting that feeling individually deprived (individual‐based relative deprivation [IRD])—a self‐focused appraisal—mediates the relationship between these two objective measures and self‐esteem. Conversely, believing that one's group is deprived (group‐based relative deprivation [GRD])—a group‐focused appraisal—mediates the relationship between these two objective measures and ethnic identity centrality. We examined these predictions in a national sample of New Zealand adults (N = 6349). As expected, income negatively correlated with IRD and GRD; in turn, IRD negatively correlated with self‐esteem, and GRD positively correlated with ethnic identity centrality. Moreover, after accounting for between‐level variability in income, neighbourhood‐level inequality had indirect effects on self‐esteem and ethnic identity centrality through IRD and GRD, respectively. Thus, income and inequality independently predicted self‐esteem and strength of ingroup identification through distinct mechanisms.