Life Satisfaction And Income Inequality
AbstractDo people care about income inequality and does income inequality affect subjective well-being? Welfare theories can predict either a positive or a negative impact of income inequality on subjective well-being and empirical research has found evidence on a positive, negative or non significant relation. This paper attempts to determine some of the possible causes of such empirical heterogeneity. Using a very large sample of world citizens, the author tests the consistency of income inequality in predicting life satisfaction. The analysis finds that income inequality has a negative and significant effect on life satisfaction. This result is robust to changes in regressors and estimation choices and also persists across different income groups and across different types of countries. However, this relation is easily obscured or reversed by multicollinearity generated by the use of country and year fixed effects. This is particularly true if the number of data points for inequality is small, which is a common feature of cross-country or longitudinal studies.
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Bibliographic InfoArticle provided by International Association for Research in Income and Wealth in its journal Review of Income and Wealth.
Volume (Year): 57 (2011)
Issue (Month): 1 (03)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0034-6586
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Other versions of this item:
- Paolo Verme, 2010. "Life Satisfaction and Income Inequality," Working Papers 2010-15, Department of Economics, Bar-Ilan University.
- Paolo Verme, 2010. "Life satisfaction and income inequality," Working Papers 178, ECINEQ, Society for the Study of Economic Inequality.
- Verme, Paolo, 2011. "Life satisfaction and income inequality," Policy Research Working Paper Series 5574, The World Bank.
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- I31 - Health, Education, and Welfare - - Welfare and Poverty - - - General Welfare
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- How does income inequality affect happiness?
by Winton Bates in Freedom and Flourishing on 2012-02-09 06:07:00
- Weinreich, Daniel, 2013. "The perception of distributive fairness and optimal taxation under uncertainty," MPRA Paper 48912, University Library of Munich, Germany.
- Giuseppe Lucio Gaeta, 2012. "In the mood for redistribution. An empirical analysis of individual preferences for redistribution in Italy," Economics Bulletin, AccessEcon, vol. 32(3), pages 2383-2398.
- Luebker, Malte, 2012. "Income Inequality, Redistribution and Poverty: Contrasting rational choice and behavioural perspectives," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
- Verme, Paolo, 2013. "The relative income and relative deprivation hypotheses : a review of the empirical literature," Policy Research Working Paper Series 6606, The World Bank.
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