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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.

Suggested Citation

  • 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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    Cited by:

    1. Clark, Andrew E. & D'Ambrosio, Conchita, 2014. "Attitudes to Income Inequality: Experimental and Survey Evidence," IZA Discussion Papers 8136, Institute of Labor Economics (IZA).
    2. Cojocaru, Alexandru & Diagne, Mame Fatou, 2014. "Should income inequality be reduced and who should benefit ? redistributive preferences in Europe and Central Asia," Policy Research Working Paper Series 7097, The World Bank.
    3. Ivlevs, Artjoms & Hinks, Timothy, 2018. "Former Communist party membership and bribery in the post-socialist countries," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 1411-1424.
    4. Alexandru Cojocaru & Mame Fatou Diagne, 2021. "Redistributive preferences in Europe and Central Asia, 2006–2016," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 29(1), pages 151-172, January.
    5. Peter Huber & Stepan Mikula, 2019. "Social capital and willingness to migrate in post-communist countries," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(1), pages 31-59, February.
    6. Chiara Amini & Elodie Douarin, 2020. "Corruption and Life Satisfaction in Transition: Is Corruption a Social Norm in Eastern Europe?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 151(2), pages 723-766, September.
    7. Michal Brzezinski, 2019. "Diagnosing Unhappiness Dynamics: Evidence from Poland and Russia," Journal of Happiness Studies, Springer, vol. 20(7), pages 2291-2327, October.
    8. Peter Huber & Josef Montag, 2020. "Homeownership, Political Participation, and Social Capital in Post‐Communist Countries and Western Europe," Kyklos, Wiley Blackwell, vol. 73(1), pages 96-119, February.
    9. James B. Davies, 2016. "The Gini Coefficient and Personal Inequality Measurement," UWO Department of Economics Working Papers 20161, University of Western Ontario, Department of Economics.
    10. Jessica Harriger-Lin & Neha Khanna & Andreas Pape, 0. "Conspicuous consumption and peer-group inequality: the role of preferences," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 0, pages 1-25.
    11. Roychowdhury, Punarjit, 2019. "Peer effects in consumption in India: An instrumental variables approach using negative idiosyncratic shocks," World Development, Elsevier, vol. 114(C), pages 122-137.
    12. Martin Schröder, 2018. "Income Inequality and Life Satisfaction: Unrelated Between Countries, Associated Within Countries Over Time," Journal of Happiness Studies, Springer, vol. 19(4), pages 1021-1043, April.
    13. Nikolova, Elena & Sanfey, Peter, 2016. "How much should we trust life satisfaction data? Evidence from the Life in Transition Survey," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 720-731.
    14. Peter Huber & Klaus Nowotny, 0. "Risk aversion and the willingness to migrate in 30 transition countries," Journal of Population Economics, Springer;European Society for Population Economics, vol. 0, pages 1-36.
    15. Jessica Harriger-Lin & Neha Khanna & Andreas Pape, 2020. "Conspicuous consumption and peer-group inequality: the role of preferences," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 18(3), pages 365-389, September.
    16. Peter Huber & Klaus Nowotny, 2020. "Risk aversion and the willingness to migrate in 30 transition countries," Journal of Population Economics, Springer;European Society for Population Economics, vol. 33(4), pages 1463-1498, October.
    17. Antonio M. Espín & Dolores Moreno-Herrero & José Sánchez-Campillo & José A. Rodríguez Martín, 2018. "Do Envy and Compassion Pave the Way to Unhappiness? Social Preferences and Life Satisfaction in a Spanish City," Journal of Happiness Studies, Springer, vol. 19(2), pages 443-469, February.
    18. Chiara Amini & Elodie Douarin, 0. "Corruption and Life Satisfaction in Transition: Is Corruption a Social Norm in Eastern Europe?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 0, pages 1-44.
    19. World Bank, 2016. "Europe and Central Asia Economic Update, November 2016," World Bank Other Operational Studies, The World Bank, number 25341, September.

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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 - Economic Systems - - Socialist Systems and Transition Economies - - - General

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