Quantile Regression and Happiness Inequality: Evidence from Germany

Using data from the German Socio-Economic Panel, this paper examines how socioeconomic characteristics shape the distribution of happiness in Germany and how these effects translate into happiness inequality. I estimate quantile regressions for 2012 and show that key socioeconomic characteristics affect happiness differently across the happiness distribution. Building on this heterogeneity, I construct a counterfactual 2017 happiness distribution by evaluating the 2017 covariate distribution under the estimated 2012 quantile-regression coefficient structure. I then examine happiness inequality and find that, despite the stability of observed happiness inequality in the data, the counterfactual distribution predicts a more equal distribution of happiness, especially according to the Gini coefficient. To reconcile observed and counterfactual inequality, I distinguish between a mechanical effect arising from changes in observed characteristics under the estimated model and a residual effect capturing the remaining deviation. The results suggest that the persistence of happiness inequality reflects residual factors not captured by observed covariates or by systematic changes in estimated returns.