IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/44827.html
   My bibliography  Save this paper

Inequality and happiness: When perceived social mobility and economic reality do not match

Author

Listed:
  • Bjornskov, 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 wellbeing 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

  • Bjornskov, 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," MPRA Paper 44827, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:44827
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/44827/1/MPRA_paper_44827.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 817-868.
    3. 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.
    4. Blanchflower, David G. & Oswald, Andrew J., 2004. "Well-being over time in Britain and the USA," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1359-1386, July.
    5. Bruno S. Frey & Alois Stutzer, 2005. "Beyond outcomes: measuring procedural utility," Oxford Economic Papers, Oxford University Press, vol. 57(1), pages 90-111, January.
    6. 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.
    7. 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.
    8. Thomas Piketty, 1995. "Social Mobility and Redistributive Politics," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 551-584.
    9. Corneo, Giacomo & Gruner, Hans Peter, 2002. "Individual preferences for political redistribution," Journal of Public Economics, Elsevier, vol. 83(1), pages 83-107, January.
    10. Alois Stutzer & Bruno S. Frey, 2003. "Institutions Matter for Procedural Utility: An Econometric Study of the Impact of Political Participation Possibilities," Chapters, in: Ram Mudambi & Pietro Maria Navarra & Giuseppe Sobbrio (ed.), Economic Welfare, International Business and Global Institutional Change, chapter 4, Edward Elgar Publishing.
    11. 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.
    12. Layard, Richard & Mayraz, Guy & Nickell, Stephen, 2009. "Does relative income matter? Are the critics right?," LSE Research Online Documents on Economics 28594, London School of Economics and Political Science, LSE Library.
    13. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," The World Bank Economic Review, World Bank Group, vol. 10(3), pages 565-591, September.
    14. 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.
    15. 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.
    16. 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;The Society for Social Choice and Welfare, vol. 30(1), pages 119-173, January.
    17. George A. Akerlof & Rachel E. Kranton, 2000. "Economics and Identity," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 715-753.
    18. Hertz Tom & Jayasundera Tamara & Piraino Patrizio & Selcuk Sibel & Smith Nicole & Verashchagina Alina, 2008. "The Inheritance of Educational Inequality: International Comparisons and Fifty-Year Trends," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(2), pages 1-48, January.
    19. Irena Grosfeld & Claudia Senik, 2008. "The Emerging Aversion to Inequality: Evidence from Poland 1992-2005," William Davidson Institute Working Papers Series wp919, William Davidson Institute at the University of Michigan.
    20. Irena Grosfeld & Claudia Senik, 2009. "The emerging aversion to inequality - Evidence from long subjective data," Working Papers halshs-00586788, HAL.
    21. 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.
    22. Orsetta Causa & Sophie Dantan & Åsa Johansson, 2009. "Intergenerational Social Mobility in European OECD Countries," OECD Economics Department Working Papers 709, OECD Publishing.
    23. 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.
    24. Ed Hopkins, 2008. "Inequality, happiness and relative concerns: What actually is their relationship?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 6(4), pages 351-372, December.
    25. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 963-1002.
    26. Miles Corak, 2006. "Do Poor Children Become Poor Adults? Lessons from a Cross-Country Comparison of Generational Earnings Mobility," Research on Economic Inequality, in: Dynamics of Inequality and Poverty, pages 143-188, Emerald Group Publishing Limited.
    27. Carol Graham & Andrew Felton, 2006. "Inequality and happiness: Insights from Latin America," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 4(1), pages 107-122, April.
    28. Frederick Solt, 2009. "Standardizing the World Income Inequality Database," LIS Working papers 496, LIS Cross-National Data Center in Luxembourg.
    29. Ederer, Florian & Patacconi, Andrea, 2010. "Interpersonal comparison, status and ambition in organizations," Journal of Economic Behavior & Organization, Elsevier, vol. 75(2), pages 348-363, August.
    30. Orsetta Causa & Åsa Johansson, 2009. "Intergenerational Social Mobility," OECD Economics Department Working Papers 707, OECD Publishing.
    31. Fischer, Justina AV, 2009. "Happiness and age cycles – return to start…," MPRA Paper 15249, University Library of Munich, Germany.
    32. Orsetta Causa & Catherine Chapuis, 2009. "Equity in Student Achievement Across OECD Countries: An Investigation of the Role of Policies," OECD Economics Department Working Papers 708, OECD Publishing.
    33. Veblen, Thorstein, 1899. "The Theory of the Leisure Class," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number veblen1899.
    34. Miles Cahill, 2005. "Is the Human Development Index Redundant?," Eastern Economic Journal, Eastern Economic Association, vol. 31(1), pages 1-5, Winter.
    35. Peter Dolton & Rita Asplund & Erling Barth (ed.), 2009. "Education and Inequality Across Europe," Books, Edward Elgar Publishing, number 12921.
    36. Teresa Casey & Christian Dustmann, 2010. "Immigrants' Identity, Economic Outcomes and the Transmission of Identity across Generations," Economic Journal, Royal Economic Society, vol. 120(542), pages 31-51, February.
    37. Jo Blanden, 2013. "Cross-Country Rankings In Intergenerational Mobility: A Comparison Of Approaches From Economics And Sociology," Journal of Economic Surveys, Wiley Blackwell, vol. 27(1), pages 38-73, February.
    38. Irena Grosfeld & Claudia Senik, 2009. "The emerging aversion to inequality - Evidence from long subjective data," PSE Working Papers halshs-00586788, HAL.
    39. 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.
    40. Justina A.V. Fischer, 2009. "The Welfare Effects of Social Mobility," OECD Social, Employment and Migration Working Papers 93, OECD Publishing.
    41. 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, July.
    42. Ruut Veenhoven, 2000. "The Four Qualities of Life," Journal of Happiness Studies, Springer, vol. 1(1), pages 1-39, March.
    43. Frederick Solt, 2009. "Standardizing the World Income Inequality Database," Social Science Quarterly, Southwestern Social Science Association, vol. 90(2), pages 231-242, June.
    44. Fischer, Justina AV, 2009. "Subjective Well-Being as Welfare Measure: Concepts and Methodology," MPRA Paper 16619, University Library of Munich, Germany.
    45. Harms, Philipp & Zink, Stefan, 2003. "Limits to redistribution in a democracy: a survey," European Journal of Political Economy, Elsevier, vol. 19(4), pages 651-668, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bjornskov, Christian & Dreher, Axel & Fischer, Justina AV & Schnellenbach, Jan, 2009. "On the relation between income inequality and happiness: Do fairness perceptions matter?," MPRA Paper 19494, University Library of Munich, Germany.
    2. repec:got:cegedp:91 is not listed on IDEAS
    3. Clark, Andrew E. & D'Ambrosio, Conchita, 2014. "Attitudes to Income Inequality: Experimental and Survey Evidence," IZA Discussion Papers 8136, Institute of Labor Economics (IZA).
    4. Elena Bárcena-Martín & Alexandra Cortés-Aguilar & Ana I. Moro-Egido, 2017. "Social Comparisons on Subjective Well-Being: The Role of Social and Cultural Capital," Journal of Happiness Studies, Springer, vol. 18(4), pages 1121-1145, August.
    5. Tamas Hajdu & Gabor Hajdu, 2013. "Are more equal societies happier? Subjective well-being, income inequality, and redistribution," CERS-IE WORKING PAPERS 1320, Institute of Economics, Centre for Economic and Regional Studies.
    6. Elena Bárcena-Martín & Cortés Aguilar Alexandra & Ana I. Moro Egido, 2013. "The role of proximity and social comparisons on subjective well-being," ThE Papers 13/10, Department of Economic Theory and Economic History of the University of Granada..
    7. Harald Lang & Florian Morath, 2015. "A Glance into the Tunnel: Experimental Evidence on Income Comparisons under Uncertainty," Working Papers tax-mpg-rps-2015-13, Max Planck Institute for Tax Law and Public Finance.
    8. Kalenborn, Christine & Lessmann, Christian, 2014. "Regional Income Inequality lowers Life Satisfaction: Evidence from OECD Countries," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100561, Verein für Socialpolitik / German Economic Association.
    9. Senik, Claudia, 2009. "Direct evidence on income comparisons and their welfare effects," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 408-424, October.
    10. Vladimir Gimpelson & Daniel Treisman, 2018. "Misperceiving inequality," Economics and Politics, Wiley Blackwell, vol. 30(1), pages 27-54, March.
    11. Eiji Yamamura & Yoshiro Tsutsui & Fumio Ohtake, 2016. "Relative Income Position and Happiness: Are Cabinet Supporters Different from Others in Japan?," The Japanese Economic Review, Springer, vol. 67(4), pages 383-402, December.
    12. 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.
    13. Yamamura, Eiji, 2011. "Effect of social capital on income distribution preferences: comparison of neighborhood externality between high- and low-income households," MPRA Paper 32557, University Library of Munich, Germany.
    14. Claudia Senik, 2008. "Ambition and Jealousy: Income Interactions in the ‘Old’ Europe versus the ‘New’ Europe and the United States," Economica, London School of Economics and Political Science, vol. 75(299), pages 495-513, August.
    15. Woo Chang Kang & Jae Seung Lee & BK Song, 2020. "Envy and Pride: How Economic Inequality Deepens Happiness Inequality in South Korea," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 150(2), pages 617-637, July.
    16. Bohmann, Sandra & Kalleitner, Fabian, 2023. "Subjective Inequity Aversion: Unfair Inequality, Subjective Well-Being, and Preferences for Redistribution," SocArXiv g8arw, Center for Open Science.
    17. repec:hal:spmain:info:hdl:2441/3ile1g7sqe8kfpi2d1e7jp82im is not listed on IDEAS
    18. Yamamura, Eiji, 2012. "Effects of siblings and birth order on income redistribution preferences," MPRA Paper 38658, University Library of Munich, Germany.
    19. Stefano Bartolini & Ennio Bilancini & Maurizio Pugno, 2013. "Did the Decline in Social Connections Depress Americans’ Happiness?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 110(3), pages 1033-1059, February.
    20. Godechot, Olivier & Senik, Claudia, 2015. "Wage comparisons in and out of the firm. Evidence from a matched employer–employee French database," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 395-410.
    21. Irena Grosfeld & Claudia Senik, 2008. "The Emerging Aversion to Inequality: Evidence from Poland 1992-2005," William Davidson Institute Working Papers Series wp919, William Davidson Institute at the University of Michigan.
    22. Ateca Amestoy, Victoria María & Cortés Aguilar, Alexandra & Moro-Egido, Ana I., 2011. "Social Interactions and Subjective Well-Being: Evidence from Latin America," DFAEII Working Papers 1988-088X, University of the Basque Country - Department of Foundations of Economic Analysis II.

    More about this item

    Keywords

    Happiness; life satisfaction; subjective well-being; inequality; income distribution; redistribution; political ideology; justice; fairness; World Values Survey;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • 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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:44827. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.