Can Emotional Intelligence promote Individual Wellbeing and protect from perceptions' traps?

Rising income inequality has become a major worry in rich countries’ societies and a focus for remedial policy action to protect individual wellbeing. However, cognitive biases, misconceptions and emotions might detach inequality, as perceived by individuals, from the real measures of inequality. On a unique survey of 627 Italian respondents to a questionnaire tailor-made to embrace individuals’ Emotional Intelligence (EI), and perceptions about various socio-economic variables, we study the determinants of wellbeing. Specifically, we quantify wellbeing alternatively through Happiness – hedonic measure – or through Flourishing – eudemonic measure – and investigate its relationship with an individual’s perceived inequality (PI) and EI. Via an instrumental variable approach to tackle the intrinsic endogeneity of wellbeing with PI and EI, we reach two main results: i) Happiness responds (negatively) to PI, and positively to EI; ii) Flourishing is positively related to EI, but not to PI. Moreover, we find that PI depends negatively on individual’s trust, and income comparison. Finally, Happiness, Flourishing and PI are all related to real measures of income inequality such as the Gini index. Thus, reducing perceived inequality and promoting the capability to recognize other’s emotions are the true channels through which policies could promote society’s wellbeing while protecting it from perception traps.