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The Welfare Effects of Social Mobility: An Analysis for OECD countries

  • Fischer, Justina AV

The question whether a socially mobile society is conducive to subjective well-being (SWB) has rarely been investigated. This paper fills this gap by analyzing the SWB effects of intergenerational earnings mobility and equality in educational attainment at the societal level. Using socio-demographic information on 44’000 individuals in 30 OECD countries obtained from the World Values Survey 1997-2001, this study shows that living in a socially mobile society is conducive to individual life satisfaction. Differentiating between perceived and actual social mobility, we find that both exert rather independent effects, particularly in their interplay with income inequality. We identify a positive interaction of perceived social mobility that mitigates the overall SWB lowering effect of income inequality. In contrast to expectations, a high degree of actual social mobility yields an overall impact of income inequality that is SWB lowering, while for low social mobility the effect of inequality is positive. Thus, people bear income inequality more easily when they perceive their society as mobile, but also - surprisingly - when their society is actually rather immobile. These interactions hold stronger for pre-transfer than post-transfer income inequality suggesting that government redistribution disentangles the effect of income inequality from that of social mobility. Robustness using a world sample is tested.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17070.

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Date of creation: 02 Sep 2009
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Handle: RePEc:pra:mprapa:17070
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  1. Christian Bjørnskov & Axel Dreher & Justina A. V. Fischer, 2006. "Cross-country determinants of life satisfaction: exploring different determinants across groups in society," LSE Research Online Documents on Economics 19290, London School of Economics and Political Science, LSE Library.
  2. Alesina, Alberto & La Ferrara, Eliana, 2002. "Who trusts others?," Journal of Public Economics, Elsevier, vol. 85(2), pages 207-234, August.
  3. Bjornskov, Christian & Dreher, Axel & Fischer, Justina AV & Schnellenbach, Jan, 2009. "On the relation between income inequality and happiness: Do fairness perceptions matter?," MPRA Paper 19502, University Library of Munich, Germany.
  4. Christian Bjørnskov & Axel Dreher & Justina A. V. Fischer, 2005. "The bigger the better? Evidence of the effect of government size on life satisfaction around the world," CER-ETH Economics working paper series 05/44, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  5. Niclas Berggren & Henrik Jordahl, 2006. "Free to Trust: Economic Freedom and Social Capital," Kyklos, Wiley Blackwell, vol. 59(2), pages 141-169, 05.
  6. Senik, Claudia, 2005. "Ambition and jealousy. Income Interactions in the "old" Europe versus The "New" Europe and the United States," CEPREMAP Working Papers (Docweb) 0510, CEPREMAP.
  7. John E. Roemer, 2002. "Equality of opportunity: A progress report," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 19(2), pages 455-471.
  8. Geeta G. Kingdon & John Knight, 2004. "Community, Comparisons and Subjective Well-being in a Divided Society," CSAE Working Paper Series 2004-21, Centre for the Study of African Economies, University of Oxford.
  9. Bjornskov, Christian & Dreher, Axel & Fischer, Justina AV, 2008. "Formal Institutions and Subjective Well-Being: Revisiting the Cross-Country Evidence," MPRA Paper 20488, University Library of Munich, Germany, revised 06 Feb 2010.
  10. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1153-89, December.
  11. Dolan, Paul & Peasgood, Tessa & White, Mathew, 2008. "Do we really know what makes us happy A review of the economic literature on the factors associated with subjective well-being," Journal of Economic Psychology, Elsevier, vol. 29(1), pages 94-122, February.
  12. Justina A.V. Fischer & Benno Torgler, 2007. "Social capital and relative income concerns: evidence from 26 countries," University of St. Gallen Department of Economics working paper series 2007 2007-05, Department of Economics, University of St. Gallen.
  13. Alberto Alesina & George-Marios Angeletos, 2002. "Fairness and Redistribution: US versus Europe," Harvard Institute of Economic Research Working Papers 1983, Harvard - Institute of Economic Research.
  14. 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.
  15. Corak, Miles, 2006. "Do Poor Children Become Poor Adults? Lessons from a Cross Country Comparison of Generational Earnings Mobility," IZA Discussion Papers 1993, Institute for the Study of Labor (IZA).
  16. Alesina, Alberto & La Ferrara, Eliana, 2005. "Preferences for redistribution in the land of opportunities," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 897-931, June.
  17. Corneo, Giacomo & Gruner, Hans Peter, 2002. "Individual preferences for political redistribution," Journal of Public Economics, Elsevier, vol. 83(1), pages 83-107, January.
  18. Jordahl, Henrik, 2007. "Inequality and Trust," Working Paper Series 715, Research Institute of Industrial Economics.
  19. David Dorn & Justina Fischer & Gebhard Kirchgässner & Alfonso Sousa-Poza, 2007. "Is It Culture or Democracy? The Impact of Democracy and Culture on Happiness," Social Indicators Research- An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 82(3), pages 505-526, July.
  20. Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 997-1019, June.
  21. La Ferrara, Eliana & Alesina, Alberto, 2005. "Preferences for Redistribution in the Land of Opportunities," Scholarly Articles 4552533, Harvard University Department of Economics.
  22. John F. Helliwell & Haifang Huang, 2006. "How's Your Government? International Evidence Linking Good Government and Well-Being," NBER Working Papers 11988, National Bureau of Economic Research, Inc.
  23. Thomas Piketty, 1994. "Social Mobility and Redistributive Politics," Working papers 94-15, Massachusetts Institute of Technology (MIT), Department of Economics.
  24. Bjørnskov, Christian & Drehe, Axel & Fischer, Justina A.V., 2008. "On decentralization and life satisfaction," Economics Letters, Elsevier, vol. 99(1), pages 147-151, April.
  25. George J. Borjas, 1992. "Ethnic Capital and Intergenerational Mobility," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 123-150.
  26. Fischer, Justina AV, 2009. "Subjective Well-Being as Welfare Measure: Concepts and Methodology," MPRA Paper 16619, University Library of Munich, Germany.
  27. Anna Christina D'Addio, 2007. "Intergenerational Transmission of Disadvantage: Mobility or Immobility Across Generations?," OECD Social, Employment and Migration Working Papers 52, OECD Publishing.
  28. Christian Bjørnskov, 2007. "Determinants of generalized trust: A cross-country comparison," Public Choice, Springer, vol. 130(1), pages 1-21, January.
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