IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

On the relation between income inequality and happiness: Do fairness perceptions matter?

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

In this paper, we revisit the association between happiness and inequality. We argue that the perceived fairness of the income generation process affects this association. Building on a two-period model of individual life-time utility maximization, we predict that persons with higher perceived fairness will experience higher levels of life-time utility and are less in favor of income redistribution. In societies with a high level of actual social mobility, income inequality is perceived more positively with increased expected fairness. The opposite is expected for countries with low actual social mobility, due to an increasing relevance of a disappointment effect resulting from unsuccessful individual investments. Using the World Values Survey data and a broad set of fairness measures, 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 disappointment effect in low social mobility countries. In contrast, the results for high-mobility countries turn out to be ambiguous.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://nbn-resolving.de/urn/resolver.pl?urn=urn:nbn:de:bsz:16-heidok-102767
File Function: Frontdoor page on HeiDOK
Download Restriction: no

File URL: http://archiv.ub.uni-heidelberg.de/volltextserver/10276/1/2009_Bjornskov_dp495.pdf
Download Restriction: no

Paper provided by University of Heidelberg, Department of Economics in its series Working Papers with number 0495.

as
in new window

Length:
Date of creation: 15 Jan 2010
Date of revision:
Handle: RePEc:awi:wpaper:0495
Note: This paper is part of http://archiv.ub.uni-heidelberg.de/volltextserver/view/schriftenreihen/sr-3.html
Contact details of provider: Postal: Grabengasse 14, D-69117 Heidelberg
Phone: +49-6221-54 2905
Fax: +49-6221-54 2914
Web page: http://www.awi.uni-heidelberg.de/Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Hirschman, Albert O., 1973. "The changing tolerance for income inequality in the course of economic development," World Development, Elsevier, vol. 1(12), pages 29-36, December.
  2. David G. Blanchflower & Andrew J. Oswald, 2000. "Well-Being Over Time in Britain and the USA," NBER Working Papers 7487, National Bureau of Economic Research, Inc.
  3. Bruno S. Frey & Alois Stutzer, 2005. "Beyond outcomes: measuring procedural utility," Oxford Economic Papers, Oxford University Press, vol. 57(1), pages 90-111, January.
  4. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 817-868, August.
  5. Christian Bjørnskov & Axel Dreher & Justina Fischer, 2008. "Cross-country determinants of life satisfaction: exploring different determinants across groups in society," Social Choice and Welfare, Springer, vol. 30(1), pages 119-173, January.
  6. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, 07.
  7. Alesina, Alberto & Di Tella, Rafael & MacCulloch, Robert, 2004. "Inequality and happiness: are Europeans and Americans different?," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2009-2042, August.
  8. Alesina, Alberto F & La Ferrara, Eliana, 2002. "Preferences for Redistribution in the Land of Opportunities," CEPR Discussion Papers 3155, C.E.P.R. Discussion Papers.
  9. Hopkins, Ed, 2008. "Inequality, Happiness and Relative Concerns: What Actually is their Relationship?," SIRE Discussion Papers 2008-01, Scottish Institute for Research in Economics (SIRE).
  10. Kohei Kawamura, 2008. "Inequality, Happiness and Relative Concerns: What Actually is their Relationship?," ESE Discussion Papers 182, Edinburgh School of Economics, University of Edinburgh.
  11. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
  12. Corneo, Giacomo & Gruner, Hans Peter, 2002. "Individual preferences for political redistribution," Journal of Public Economics, Elsevier, vol. 83(1), pages 83-107, January.
  13. La Ferrara, Eliana & Alesina, Alberto, 2005. "Preferences for Redistribution in the Land of Opportunities," Scholarly Articles 4552533, Harvard University Department of Economics.
  14. Dohmen, Thomas & Falk, Armin & Huffman, David & Marklein, Felix & Sunde, Uwe, 2009. "Biased probability judgment: Evidence of incidence and relationship to economic outcomes from a representative sample," Journal of Economic Behavior & Organization, Elsevier, vol. 72(3), pages 903-915, December.
  15. Dohmen, Thomas J. & Falk, Armin & Huffman, David & Marklein, Felix & Sunde, Uwe, 2009. "Biased probability judgment: Evidence of incidence and relationship to economic outcomes from a representative sample," Munich Reprints in Economics 20042, University of Munich, Department of Economics.
  16. Ravallion, Martin & Lokshin, Michael, 2000. "Who wants to redistribute?: The tunnel effect in 1990s Russia," Journal of Public Economics, Elsevier, vol. 76(1), pages 87-104, April.
  17. Andrew CLARK & Emanuela D'ANGELO, 2010. "Upward Social Mobility, Well-being and;Political Preferences: Evidence from the;BHPS," Working Papers 338, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  18. Justina A.V. Fischer, 2009. "Happiness and Age Cycles - Return to Start...?: On the Functional Relationship between Subjective Well-Being and Age," OECD Social, Employment and Migration Working Papers 99, OECD Publishing.
  19. Fischer, Justina AV, 2009. "Subjective Well-Being as Welfare Measure: Concepts and Methodology," MPRA Paper 16619, University Library of Munich, Germany.
  20. Ruut Veenhoven, 2000. "The Four Qualities of Life," Journal of Happiness Studies, Springer, vol. 1(1), pages 1-39, March.
  21. Justina A.V. Fischer, 2009. "The Welfare Effects of Social Mobility," OECD Social, Employment and Migration Working Papers 93, OECD Publishing.
  22. Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
  23. Richard Layard & Guy Mayraz & Stephen Nickell, 2009. "Does Relative Income Matter?: Are the Critics Right?," SOEPpapers on Multidisciplinary Panel Data Research 210, DIW Berlin, The German Socio-Economic Panel (SOEP).
  24. Irena Grosfeld & Claudia Senik, 2009. "The emerging aversion to inequality - Evidence from long subjective data," PSE Working Papers halshs-00586788, HAL.
  25. Fehr, Ernst & Schmidt, Klaus M., 1999. "A theory of fairness, competition, and cooperation," Munich Reprints in Economics 20650, University of Munich, Department of Economics.
  26. Fischer, Justina AV, 2009. "Happiness and age cycles – return to start…," MPRA Paper 15249, University Library of Munich, Germany.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:awi:wpaper:0495. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gabi Rauscher)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.