Area-Level Income Inequality and Individual Happiness: Evidence from Japan

Abstract

In this study, we investigated how area-level income inequality is associated with an individual’s assessment of happiness, based on micro-level data sourced from nationwide surveys in Japan. It was confirmed from our analysis using logit models that individuals who live in areas of high income inequality tend to report themselves as being less happy, even after controlling for various individual and area-level factors. The association between inequality and happiness is modestly significant, regardless of the choice of covariates at an individual level, and stronger at a lower level of perceived happiness. Moreover, sensitivity to inequality differs substantially according to certain individual attributes. Among others, an important implication for social policy is that those with unstable occupational status are more sensitive to inequality. Given that these people tend to be less happy than others, this result indicates the risk that area-level inequality further reduces the well-being of those with unfavorable employment conditions.