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Inequality, Happiness and Relative Concerns: What Actually is their Relationship?

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  • Ed Hopkins

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Abstract

This paper briefly and informally surveys different theoretical models of relative concerns and their relation to inequality. Models of inequity aversion in common use in experimental economics imply a negative relation between inequality and happiness. In contrast, empirical studies on happiness typically employ models of relative concerns that assume that increases in others’ income always have a negative effect on own happiness. However, in these latter models, the relation between inequality and happiness can be positive. One possible solution is a rivalry model where a distinction is made between endowment and reward inequality which have respectively a negative and positive effect on happiness. These different models and their contrasting results may clarify why the empirical relationship between inequality and happiness has been difficult to establish.

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Bibliographic Info

Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 180.

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Length: 25
Date of creation: 11 Feb 2008
Date of revision:
Handle: RePEc:edn:esedps:180

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Keywords: : inequality; relative position; social preferences; tournaments; evolution.;

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References

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