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

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

Abstract

We argue that perceived fairness of the income generation process affects the association between income inequality and subjective well-being, and that there are systematic differences in this regard between countries that are characterized by a high or, respectively, low level of actual fairness. Using a simple model of individual labor market participation under uncertainty, we predict that high levels of perceived fairness cause higher levels of individual welfare, and lower support for income redistribution. Income inequality is predicted to have a more favorable impact on subjective well-being for individuals with high fairness perceptions. This relationship is predicted to be stronger in societies that are characterized by low actual fairness. Using data on subjective well-being and a broad set of fairness measures from a pseudo micro-panel from the WVS over the 1990-2008 period, we find strong support for the negative (positive) association between fairness perceptions and the demand for more equal incomes (subjective well-being). We also find strong empirical support for the predicted differences in individual tolerance for income inequality, and the predicted influence of actual fairness. --

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Bibliographic Info

Paper provided by Walter Eucken Institut e.V. in its series Freiburg Discussion Papers on Constitutional Economics with number 13/2.

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Date of creation: 2013
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Handle: RePEc:zbw:aluord:132

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

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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. 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.
  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. 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.
  5. Feld, Lars P. & Schnellenbach, Jan, 2013. "Political institutions and income (re-)distribution: Evidence from developed economies," Freiburg Discussion Papers on Constitutional Economics 13/6, Walter Eucken Institut e.V..
  6. Schnellenbach, Jan & Schubert, Christian, 2014. "Behavioral public choice: A survey," Freiburg Discussion Papers on Constitutional Economics 14/03, Walter Eucken Institut e.V..
  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.

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