Income Inequality and Life Satisfaction: Unrelated Between Countries, Associated Within Countries Over Time

Abstract

This article shows for the first time that people are less satisfied when inequality in their country is higher than before, but not when inequality in their country is higher than in another country. It distinguishes this between- and within-country effect of inequality on life satisfaction by using hybrid regressions with the World Values Survey, the British Household Panel Study, the Australian panel study of Household Income and Labour Dynamics, the Korean Labor and Income Panel, the Russian Longitudinal Monitoring study, the Swiss Household Panel and the German Socio-Economic Panel. That life satisfaction is unaffected by long-run levels of inequality, but by changes of inequality over time, suggests that life satisfaction researchers should focus on changes of inequality over time to understand its influence on life satisfaction.