How does Inequality Hamper Subjective Well-being? The Role of Fairness

In this study, we aim at clarifying the role of economic inequality on the subjective well-being of individuals. For this purpose, we use more than 180,000 individuals from 51 countries in the most recent five waves (1990–2014) of the World Values Survey. We observe a significant tradeoff between life satisfaction, happiness and the Gini coefficient. Also, inequality is negatively associated with life satisfaction and happiness for lower-income groups as well as higher-income groups. Interestingly, our data also shows large scale embracement of inequality in self-reported attitudes as even almost half (49%) of the lower-income group support the statement that some inequality is necessary for sustaining individual effort. Perceived freedom, and perceived social mobility partially mediates the relationship between the Gini coefficient and subjective wellbeing indicators. Yet, there remains a substantial negative effect of inequality on subjective well-being. Nevertheless, when individuals’ perception of fairness is included, the effect of inequality disappears for both higher-income and lower-income groups. Overall, our findings suggest that people are bothered by inequality primarily due to fairness concerns.