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Reduction of income inequality and subjective well-being in Europe

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  • Hajdu, Tamás
  • Hajdu, Gábor

Abstract

Using four waves of the European Social Survey (179,273 individuals from 29 countries) the authors analyze the association of reduction of income inequality (redistribution) with subjective wellbeing. Their results provide evidence that people in Europe are negatively affected by income inequality, whereas reduction of inequality has a positive effect on well-being. Since the authors simultaneously estimate the effects of income inequality and its reduction, their results indicate that not only the outcome (inequality), but also the procedure (redistribution) that leads to the outcome influences subjective well-being. The authors argue that living in a country where taxes and transfers reduce income inequality to a greater extent, the poor may feel more protected, and the rich may also feel more generous, which may result in an emotional benefit for them. It is also possible that well-being is associated not only with actual, but also with perceived inequality. The positive effect of redistribution seems to be stronger for less affluent members of the societies and left-wing oriented individuals. The estimations are different in Eastern and Western Europe: In post-communist countries people appear to be harder hit by inequality, whereas the impact of inequality reduction on well-being is higher in the East than in the West. --

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2014-22.

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Date of creation: 2014
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Handle: RePEc:zbw:ifwedp:201422

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Keywords: subjective well-being; satisfaction; inequality; redistribution; inequality reduction;

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  1. Stevenson, Betsey & Wolfers, Justin, 2013. "Subjective Well‐Being and Income: Is There Any Evidence of Satiation?," IZA Discussion Papers 7353, Institute for the Study of Labor (IZA).
  2. Di Tella, R. & MacCulloch, R.J.: Oswald, A.J., 1997. "The Macroeconomics of Happiness," Papers 19, Centre for Economic Performance & Institute of Economics.
  3. Cruces, Guillermo & Perez Truglia, Ricardo & Tetaz, Martin, 2011. "Biased Perceptions of Income Distribution and Preferences for Redistribution: Evidence from a Survey Experiment," IZA Discussion Papers 5699, Institute for the Study of Labor (IZA).
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  9. Schwarze, Johannes & Harpfer, Marco, 2007. "Are people inequality averse, and do they prefer redistribution by the state?: Evidence from German longitudinal data on life satisfaction," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 36(2), pages 233-249, April.
  10. La Ferrara, Eliana & Alesina, Alberto, 2005. "Preferences for Redistribution in the Land of Opportunities," Scholarly Articles 4552533, Harvard University Department of Economics.
  11. Scorzafave, Luiz Guilherme & Soares, Milena Karla, 2009. "Income inequality and pecuniary crimes," Economics Letters, Elsevier, vol. 104(1), pages 40-42, July.
  12. Rafael Di Tella & Robert MacCulloch, 2005. "Gross National Happiness as an Answer to the Easterlin Paradox?," Macroeconomics 0504027, EconWPA.
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