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Fairness and inequality tolerance: Evidence from the Life in Transition Survey

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  • Cojocaru, Alexandru

Abstract

This paper examines the link between inequality and individual well-being using household survey data from 27 transition economies, where income inequality increased considerably since 1989. A test of inequality aversion in individual preferences that draws on the Fehr and Schmidt (1999) specification of inequality aversion is proposed, and the difficulties of implementing it in a non-experimental setting are discussed. Estimates based on this model confirm aversion to inequality among individuals both in the pooled sample and separately among the EU and non-EU countries. The Gini index, on the other hand, is unable to capture this negative effect of inequality on well-being. Notably, inequality aversion is not intrinsic. Rather, it appears to be tied to a concern with the fairness of the institutions underlying the distribution of fortunes in society. The evidence is suggestive of inequality of opportunity driving attitudes toward overall inequality.

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  • Cojocaru, Alexandru, 2014. "Fairness and inequality tolerance: Evidence from the Life in Transition Survey," Journal of Comparative Economics, Elsevier, vol. 42(3), pages 590-608.
    • Handle: RePEc:eee:jcecon:v:42:y:2014:i:3:p:590-608
    DOI: 10.1016/j.jce.2014.01.003
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    12. World Bank, "undated". "Europe and Central Asia Economic Update, November 2016," World Bank Publications - Reports 25341, The World Bank Group.
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    14. Demougin, Dominique & Upton, Harvey, 2023. "Relative income concerns and the Easterlin Paradox: A theoretical framework," Economic Modelling, Elsevier, vol. 127(C).
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    More about this item

    Keywords

    Inequality aversion; Relative deprivation; Subjective well-being; Transition economies;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General

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