Abstract
Abstract In this paper we present new quantitative results on the linkages between absolute income levels, relative incomes, income inequality, and attitudes towards redistribution in a large sample of countries over the past 30 years. While we find that absolute income levels have a significant but very small effect on well-being, we find that relative incomes matter much more. In addition, we find that preferences for inequality are a significant driver of well-being. Lastly, we observe that overall inequality has an additional negative impact on well-being in a country in all three country-groupings. Taken together, this suggests that inequality has a rather strong negative impact on well-being. In fact, depending on the context, reducing inequality can do more to promote subjective well-being than increasing economic growth.
Highlights
The topic of inequality has been studied by economists and economic historians for decades
Average levels of life satisfaction are higher in high income countries than in the other two groups, presumably linked to their substantially higher per capita incomes
We are able to confirm many of the known findings on the individual determinants of subjective well-being, which are visible in our sample of high-income and developing countries
Summary
The topic of inequality has been studied by economists and economic historians for decades. There are a number of studies which provide evidence that higher income goes hand in hand with higher satisfaction scores.[9] For example, Stevenson and Wolfers[10] as well as Deaton[11] make use of the Gallup World Poll data, an ongoing survey which started in 2005 and interviews people in more than 130 countries, and cannot identify a significant income threshold between poorer and richer nations This implies that economic growth will increase life satisfaction in a similar way in any country, regardless of the actual income level. Both studies conclude that income growth will have a lasting (but modest) effect on life satisfaction This result has been disputed in particular by Easterlin and Angelescu.[12] Their own analysis of the long term dynamics between income and happiness, using a larger set of countries than Easterlin’s original paper, again finds no correlation and confirms the paradox. The Commission is expected to develop a holistic measure of well-being and social progress, which will combine indicators on economic performance, quality of life, and sustainability.[25]
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