Advanced Search
MyIDEAS: Login

Inequality and Happiness: When Perceived Social Mobility and Economic Reality do not Match

Contents:

Author Info

  • Christian Bjørnskov
  • Axel Dreher
  • Justina A.V. Fischer
  • Jan Schnellenbach

Abstract

In this paper, we revisit the association between happiness and inequality. We argue that the interaction between the perceived and the actual fairness of the income generation process affects this association. Building on a simple model of individual labor-market participation under uncertainty, we predict that higher levels of perceived fairness cause higher levels of utility, and lower preferred levels of income redistribution. In societies with a low level of actual social mobility, income inequality is perceived more negatively with increased perceived fairness, due to the need for unexpected policy changes as a response to many unsuccessful investments of overly optimistic individuals. This effect becomes smaller as actual social mobility increases. Using data on happiness and a broad set of fairness measures from the World Values Survey, we find strong support for the negative (positive) association between fairness perceptions and the demand for more equal incomes (subjective wellbeing). We also find strong empirical support for the disappointment effect in countries with low social mobility. Consistent with our theoretical model, the results for high-mobility countries turn out to be ambiguous.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2010/wp-cesifo-2010-10/cesifo1_wp3216.pdf
Download Restriction: no

Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3216.

as in new window
Length:
Date of creation: 2010
Date of revision:
Handle: RePEc:ces:ceswps:_3216

Contact details of provider:
Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Email:
Web page: http://www.cesifo.de
More information through EDIRC

Related research

Keywords: happiness; life satisfaction; subjective well-being; inequality; income distribution; redistribution; political ideology; justice; fairness; World Values Survey;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
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.:
as in new window
  1. Orsetta Causa & Catherine Chapuis, 2009. "Equity in Student Achievement Across OECD Countries: An Investigation of the Role of Policies," OECD Economics Department Working Papers 708, OECD Publishing.
  2. Piketty, Thomas, 1995. "Social Mobility and Redistributive Politics," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 551-84, August.
  3. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, MIT Press, vol. 120(3), pages 963-1002, August.
  4. Hopkins, Ed, 2008. "Inequality, Happiness and Relative Concerns: What Actually is their Relationship?," SIRE Discussion Papers 2008-01, Scottish Institute for Research in Economics (SIRE).
  5. Justina A.V. Fischer & Benno Torgler, 2013. "Do Positional Concerns Destroy Social Capital: Evidence From 26 Countries," Economic Inquiry, Western Economic Association International, vol. 51(2), pages 1542-1565, 04.
  6. Andrea Patacconi & Florian Ederer, 2005. "Interpersonal Comparison, Status and Ambition in Organisations," Economics Series Working Papers 222, University of Oxford, Department of Economics.
  7. Orsetta Causa & Åsa Johansson, 2009. "Intergenerational Social Mobility," OECD Economics Department Working Papers 707, OECD Publishing.
  8. Bjornskov, Christian & Dreher, Axel & Fischer, Justina AV & Schnellenbach, Jan, 2010. "Inequality and happiness: When perceived social mobility and economic reality do not match," MPRA Paper 25826, University Library of Munich, Germany.
  9. Dohmen, Thomas & Falk, Armin & Huffman, David B. & Marklein, Felix & Sunde, Uwe, 2009. "Biased Probability Judgment: Evidence of Incidence and Relationship to Economic Outcomes from a Representative Sample," IZA Discussion Papers 4170, Institute for the Study of Labor (IZA).
  10. David G. Blanchflower & Andrew J. Oswald, 2000. "Well-Being Over Time in Britain and the USA," NBER Working Papers 7487, National Bureau of Economic Research, Inc.
  11. Jo Blanden, 2013. "Cross-Country Rankings In Intergenerational Mobility: A Comparison Of Approaches From Economics And Sociology," Journal of Economic Surveys, Wiley Blackwell, vol. 27(1), pages 38-73, 02.
  12. Frey, Bruno S. & Stutzer, Alois, 2002. "Beyond Outcomes: Measuring Procedural Utility," Berkeley Olin Program in Law & Economics, Working Paper Series qt7qp9q1js, Berkeley Olin Program in Law & Economics.
  13. Andrew E. Clark & Emanuela D'Angelo, 2013. "Upward Social Mobility, Well-being and Political Preferences: Evidence from the BHPS," CEP Discussion Papers dp1252, Centre for Economic Performance, LSE.
  14. Christian Bjørnskov & Axel Dreher & Justina A.V. Fischer, 2005. "Cross-Country Determinants of Life Satisfaction: Exploring Different Determinants across Groups in Society," University of St. Gallen Department of Economics working paper series 2005 2005-19, Department of Economics, University of St. Gallen.
  15. Ada Ferrer-i-Carbonell & Paul Frijters, 2002. "How important is Methodology for the Estimates of the Determinants of Happiness?," Tinbergen Institute Discussion Papers 02-024/3, Tinbergen Institute.
  16. Klaus Deininger & Lyn Squire, 1996. "A New Data Set Measuring Income Inequality," CEMA Working Papers 512, China Economics and Management Academy, Central University of Finance and Economics.
  17. Alesina, Alberto & La Ferrara, Eliana, 2005. "Preferences for redistribution in the land of opportunities," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 897-931, June.
  18. Richard Layard & Guy Mayraz & Stephen Nickell, 2009. "Does relative income matter? Are the critics right?," LSE Research Online Documents on Economics 28594, London School of Economics and Political Science, LSE Library.
  19. Tom Hertz & Tamara Jayasundera & Patrizio Piraino & Sibel Selcuk & Nicole Smith & Alina Verashchagina, 2007. "The Inheritance of Educational Inequality: International Comparisons and Fifty-Year Trends," Working Papers 2007-013, American University, Department of Economics.
  20. Harms, Philipp & Zink, Stefan, 2003. "Limits to redistribution in a democracy: a survey," European Journal of Political Economy, Elsevier, vol. 19(4), pages 651-668, November.
  21. Gehring, Kai, 2013. "Who Benefits from Economic Freedom? Unraveling the Effect of Economic Freedom on Subjective Well-Being," World Development, Elsevier, vol. 50(C), pages 74-90.
  22. Irena Grosfeld & Claudia Senik, 2009. "The emerging aversion to inequality - Evidence from long subjective data," PSE Working Papers halshs-00586788, HAL.
  23. Orsetta Causa & Sophie Dantan & Åsa Johansson, 2009. "Intergenerational Social Mobility in European OECD Countries," OECD Economics Department Working Papers 709, OECD Publishing.
  24. Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers 004, Institute for Empirical Research in Economics - University of Zurich.
  25. Fischer, Justina AV, 2009. "Happiness and age cycles – return to start…," MPRA Paper 15249, University Library of Munich, Germany.
  26. Alberto Alesina & Rafael Di Tella & Robert MacCulloch, 2001. "Inequality and Happiness: Are Europeans and Americans Different?," NBER Working Papers 8198, National Bureau of Economic Research, Inc.
  27. Clark, Andrew E. & Frijters, Paul & Shields, Michael A., 2007. "Relative Income, Happiness and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," IZA Discussion Papers 2840, Institute for the Study of Labor (IZA).
  28. Corneo, Giacomo & Grüner, Hans Peter, 2001. "Individual Preferences for Political Redistribution," CEPR Discussion Papers 2694, C.E.P.R. Discussion Papers.
  29. Carol Graham & Andrew Felton, 2006. "Inequality and happiness: Insights from Latin America," Journal of Economic Inequality, Springer, vol. 4(1), pages 107-122, April.
  30. Miles Cahill, 2005. "Is the Human Development Index Redundant?," Eastern Economic Journal, Eastern Economic Association, vol. 31(1), pages 1-5, Winter.
  31. Hirschman, Albert O., 1973. "The changing tolerance for income inequality in the course of economic development," World Development, Elsevier, vol. 1(12), pages 29-36, December.
  32. Fischer, Justina AV, 2009. "Subjective Well-Being as Welfare Measure: Concepts and Methodology," MPRA Paper 16619, University Library of Munich, Germany.
  33. Frederick Solt, 2009. "Standardizing the World Income Inequality Database," Social Science Quarterly, Southwestern Social Science Association, vol. 90(2), pages 231-242.
  34. Teresa Casey & Christian Dustmann, 2010. "Immigrants' Identity, Economic Outcomes and the Transmission of Identity across Generations," Economic Journal, Royal Economic Society, vol. 120(542), pages F31-F51, 02.
  35. La Ferrara, Eliana & Alesina, Alberto, 2005. "Preferences for Redistribution in the Land of Opportunities," Scholarly Articles 4552533, Harvard University Department of Economics.
  36. Veblen, Thorstein, 1899. "The Theory of the Leisure Class," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number veblen1899.
  37. Ravallion, Martin & Lokshin, Michael, 2000. "Who wants to redistribute?: The tunnel effect in 1990s Russia," Journal of Public Economics, Elsevier, vol. 76(1), pages 87-104, April.
  38. Hongyi Li & Lyn Squire & Tao Zhang & Heng-fu Zou, 1999. "A Data Set on Income Distribution," CEMA Working Papers 575, China Economics and Management Academy, Central University of Finance and Economics.
  39. George A. Akerlof & Rachel E. Kranton, 2000. "Economics And Identity," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 715-753, August.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Inequality and happiness: When perceived social mobility and economic reality do not match
    by maximorossi in NEP-LTV blog on 2010-12-21 13:54:59
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Engelhardt, Carina & Wagener, Andreas, 2014. "Biased Perceptions of Income Inequality and Redistribution," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover dp-526, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  2. Jesper Rözer & Gerbert Kraaykamp, 2013. "Income Inequality and Subjective Well-being: A Cross-National Study on the Conditional Effects of Individual and National Characteristics," Social Indicators Research, Springer, vol. 113(3), pages 1009-1023, September.
  3. Justina A V Fischer & Benno Torgler, 2011. "Do Positional Concerns Destroy Social Capital: Evidence from 26 Countries," School of Economics and Finance Discussion Papers and Working Papers Series 265, School of Economics and Finance, Queensland University of Technology.
  4. Gehring, Kai, 2013. "Who Benefits from Economic Freedom? Unraveling the Effect of Economic Freedom on Subjective Well-Being," World Development, Elsevier, vol. 50(C), pages 74-90.
  5. Bjornskov, Christian & Dreher, Axel & Fischer, Justina A.V. & Schnellenbach, Jan & Gehring, Kai, 2013. "Inequality and happiness: When perceived social mobility and economic reality do not match," MPRA Paper 44827, University Library of Munich, Germany.
  6. Lars P. Feld & Jan Schnellenbach, 2013. "Political Institutions and Income (Re-)Distribution: Evidence from Developed Economies," CESifo Working Paper Series 4382, CESifo Group Munich.
  7. Schnellenbach, Jan & Schubert, Christian, 2014. "Behavioral public choice: A survey," Freiburg Discussion Papers on Constitutional Economics 14/03, Walter Eucken Institut e.V..

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_3216. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.