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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.

Suggested Citation

  • Bjørnskov, Christian & Dreher, Axel & Fischer, Justina A.V. & Schnellenbach, Jan & Gehring, Kai, 2013. "Inequality and happiness: When perceived social mobility and economic reality do not match," Journal of Economic Behavior & Organization, Elsevier, vol. 91(C), pages 75-92.
  • Handle: RePEc:eee:jeborg:v:91:y:2013:i:c:p:75-92
    DOI: 10.1016/j.jebo.2013.03.017
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    Cited by:

    1. Andrew E. Clark & Conchita D'Ambrosio, 2014. "Attitudes to Income Inequality: Experimental and Survey Evidence," Working Papers halshs-00967938, HAL.
    2. Raab, Roman, 2016. "Workplace perception and job-satisfaction of older workers," MPRA Paper 70917, University Library of Munich, Germany.
    3. Bjørnskov, Christian & Dreher, Axel & Fischer, Justina A.V. & Schnellenbach, Jan & Gehring, Kai, 2013. "Inequality and happiness: When perceived social mobility and economic reality do not match," Journal of Economic Behavior & Organization, Elsevier, vol. 91(C), pages 75-92.
    4. 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: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 113(3), pages 1009-1023, September.
    5. repec:erc:cypepr:v:11:y:2017:i:1:p:41-68 is not listed on IDEAS
    6. Lars Feld & Jan Schnellenbach, 2014. "Political institutions and income (re-)distribution: evidence from developed economies," Public Choice, Springer, vol. 159(3), pages 435-455, June.
    7. 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).
    8. Sibylle Puntscher & Janette Walde & Gottfried Tappeiner, 2016. "Do methodical traps lead to wrong development strategies for welfare? A multilevel approach considering heterogeneity across industrialized and developing countries," Working Papers 2016-01, Faculty of Economics and Statistics, University of Innsbruck.
    9. repec:eee:socmed:v:188:y:2017:i:c:p:11-20 is not listed on IDEAS
    10. Justina A.V. Fischer & Benno Torgler, 2013. "Do Positional Concerns Destroy Social Capital: Evidence From 26 Countries," Economic Inquiry, Western Economic Association International, vol. 51(2), pages 1542-1565, April.
    11. repec:kap:iecepo:v:14:y:2017:i:2:d:10.1007_s10368-016-0371-1 is not listed on IDEAS
    12. Christoph Schinke, 2014. "Government Ideology, Globalization, and Top Income Shares in OECD Countries," ifo Working Paper Series 181, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    13. Schnellenbach, Jan & Schubert, Christian, 2014. "Behavioral public choice: A survey," Freiburg Discussion Papers on Constitutional Economics 14/03, Walter Eucken Institut e.V..
    14. Andreas Kuhn, 2016. "The Subversive Nature of Inequality: Subjective Inequality Perceptions and Attitudes to Social Inequality," CESifo Working Paper Series 6023, CESifo Group Munich.
    15. Engelhardt, Carina & Wagener, Andreas, 2014. "Biased Perceptions of Income Inequality and Redistribution," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100395, Verein für Socialpolitik / German Economic Association.
    16. 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.
    17. Florian Dorn & Christoph Schinke, 2018. "Top Income Shares in OECD Countries: The Role of Government Ideology and Globalization," ifo Working Paper Series 246, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    18. Eiji Yamamura, 2014. "Comparing the influence of conflict on the perceptions of rich and poor: testing the hypothesis of Acemoglu and Robinson," ISER Discussion Paper 0911, Institute of Social and Economic Research, Osaka University.
    19. Kuhn, Andreas, 2015. "The Subversive Nature of Inequality: Subjective Inequality Perceptions and Attitudes to Social Inequality," IZA Discussion Papers 9406, Institute for the Study of Labor (IZA).
    20. Germán Reyes & Leonardo Gasparini, 2017. "Perceptions of Distributive Justice in Latin America During a Period of Falling Inequality," CEDLAS, Working Papers 0209, CEDLAS, Universidad Nacional de La Plata.
    21. AMENDOLA, Adalgiso & DELL'ANNO, Roberto & PARISI, Lavinia, 2015. "Happiness, Inequality and Relative Concerns in European Countries," CELPE Discussion Papers 136, CELPE - Centre of Labour Economics and Economic Policy, University of Salerno, Italy.
    22. Kalenborn, Christine & Lessmann, Christian, 2014. "Regional Income Inequality lowers Life Satisfaction: Evidence from OECD Countries," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100561, Verein für Socialpolitik / German Economic Association.
    23. repec:spr:soinre:v:132:y:2017:i:3:d:10.1007_s11205-016-1327-0 is not listed on IDEAS
    24. Nikolaev, Boris & Bennett, Daniel L., 2016. "Give me liberty and give me control: Economic freedom, control perceptions and the paradox of choice," European Journal of Political Economy, Elsevier, vol. 45(S), pages 39-52.

    More about this item

    Keywords

    Happiness; Life satisfaction; Subjective well-being; Inequality; Income distribution; Redistribution; Political ideology; Justice; Fairness; World Values Survey;

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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