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Inequality and happiness: When perceived social mobility and economic reality do not match

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Author Info

  • Christian Bjørnskov

    ()
    (Aarhus University)

  • Axel Dreher

    ()
    (University of Goettingen)

  • Justina A.V. Fischer

    ()
    (Faculty of Economics, University of Rome "Tor Vergata")

  • Jan Schnellenbach

    ()
    (Ruprecht-Karls-Universität Heidelberg,)

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.

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Bibliographic Info

Paper provided by Tor Vergata University, CEIS in its series CEIS Research Paper with number 173.

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Length: 55 pages
Date of creation: 08 Nov 2010
Date of revision: 08 Nov 2010
Handle: RePEc:rtv:ceisrp:173

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Related research

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

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References

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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
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Cited by:
  1. Clark, Andrew E. & D'Ambrosio, Conchita, 2014. "Attitudes to Income Inequality: Experimental and Survey Evidence," IZA Discussion Papers 8136, Institute for the Study of Labor (IZA).
  2. Lars P. Feld & Jan Schnellenbach, 2013. "Political Institutions and Income (Re-)Distribution: Evidence from Developed Economies," CESifo Working Paper Series 4382, CESifo Group Munich.
  3. Christian Bjørnskov & Axel Dreher & Justina A.V. Fischer & Jan Schnellenbach, 2010. "Inequality and Happiness: When Perceived Social Mobility and Economic Reality do not Match," CESifo Working Paper Series 3216, CESifo Group Munich.
  4. Christoph Schinke, 2014. "Government Ideology, Globalization, and Top Income Shares in OECD Countries," Ifo Working Paper Series Ifo Working Paper No. 181, Ifo Institute for Economic Research at the University of Munich.
  5. 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.
  6. Carina Engelhardt & Andreas Wagener, 2014. "Biased Perceptions of Income Inequality and Redistribution," CESifo Working Paper Series 4838, CESifo Group Munich.
  7. 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.
  8. Schnellenbach, Jan & Schubert, Christian, 2014. "Behavioral public choice: A survey," Freiburg Discussion Papers on Constitutional Economics 14/03, Walter Eucken Institut e.V..
  9. Engelhardt, Carina & Wagener, Andreas, 2014. "Biased Perceptions of Income Inequality and Redistribution," Hannover Economic Papers (HEP) dp-526, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  10. 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.

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