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

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

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

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 well-being 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.

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://econstor.eu/bitstream/10419/71284/1/739834703.pdf
Download Restriction: no

Paper provided by Walter Eucken Institut e.V. in its series Freiburg Discussion Papers on Constitutional Economics with number 13/2.

as
in new window

Length:
Date of creation: 2013
Date of revision:
Handle: RePEc:zbw:aluord:132
Contact details of provider: Postal: Goethestrasse 10, D-79100 Freiburg im Breisgau
Phone: +49.761.79097-0
Fax: +49.761.79097-97
Web page: http://www.walter-eucken-institut.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. 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.
  2. 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, 04.
  3. 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.
  4. Fischer, Justina AV, 2009. "Happiness and age cycles – return to start…," MPRA Paper 15249, University Library of Munich, Germany.
  5. Bjornskov, Christian & Dreher, Axel & Fischer, Justina AV & Schnellenbach, Jan, 2010. "Inequality and happiness: When perceived social mobility and economic reality do not match," MPRA Paper 25826, University Library of Munich, Germany.
  6. Richard Layard & Guy Mayraz & Stephen Nickell, 2009. "Does Relative Income Matter? Are the Critics Right?," CEP Discussion Papers dp0918, Centre for Economic Performance, LSE.
  7. Alberto Alesina & Rafael Di Tella & Robert MacCulloch, 2001. "Inequality and Happiness: Are Europeans and Americans Different?," NBER Working Papers 8198, National Bureau of Economic Research, Inc.
  8. Christian Bjørnskov & Axel Dreher & Justina A. V. Fischer, 2006. "Cross-Country Determinants of Life Satisfaction:Exploring Different Determinants across Groups inSociety," STICERD - Political Economy and Public Policy Paper Series 21, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  9. Erzo F.P. Luttmer, 2004. "Neighbors as Negatives: Relative Earnings and Well-Being," NBER Working Papers 10667, National Bureau of Economic Research, Inc.
  10. Piketty, Thomas, 1995. "Social Mobility and Redistributive Politics," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 551-84, August.
  11. 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.
  12. Clark, Andrew E. & Frijters, Paul & Shields, Michael A., 2007. "Relative Income, Happiness and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," IZA Discussion Papers 2840, Institute for the Study of Labor (IZA).
  13. Ada Ferrer-i-Carbonell & Paul Frijters, 2002. "How important is Methodology for the Estimates of the Determinants of Happiness?," Tinbergen Institute Discussion Papers 02-024/3, Tinbergen Institute.
  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. Frey, Bruno S. & Stutzer, Alois, 2002. "Beyond Outcomes: Measuring Procedural Utility," Berkeley Olin Program in Law & Economics, Working Paper Series qt7qp9q1js, Berkeley Olin Program in Law & Economics.
  16. 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 F31-F51, 02.
  17. Irena Grosfeld & Claudia Senik, 2009. "The emerging aversion to inequality - Evidence from long subjective data," PSE Working Papers halshs-00586788, HAL.
  18. Orsetta Causa & Sophie Dantan & Åsa Johansson, 2009. "Intergenerational Social Mobility in European OECD Countries," OECD Economics Department Working Papers 709, OECD Publishing.
  19. 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).
  20. 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.
  21. Klaus Deininger & Lyn Squire, 1996. "A New Data Set Measuring Income Inequality," CEMA Working Papers 512, China Economics and Management Academy, Central University of Finance and Economics.
  22. 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.
  23. 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, 02.
  24. 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.
  25. Orsetta Causa & Åsa Johansson, 2009. "Intergenerational Social Mobility," OECD Economics Department Working Papers 707, OECD Publishing.
  26. 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.
  27. 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.
  28. Frederick Solt, 2009. "Standardizing the World Income Inequality Database," Social Science Quarterly, Southwestern Social Science Association, vol. 90(2), pages 231-242.
  29. 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.
  30. Fischer, Justina AV, 2009. "Subjective Well-Being as Welfare Measure: Concepts and Methodology," MPRA Paper 16619, University Library of Munich, Germany.
  31. Corneo, Giacomo & Gruner, Hans Peter, 2002. "Individual preferences for political redistribution," Journal of Public Economics, Elsevier, vol. 83(1), pages 83-107, January.
  32. Carol Graham & Andrew Felton, 2006. "Inequality and happiness: Insights from Latin America," Journal of Economic Inequality, Springer, vol. 4(1), pages 107-122, April.
  33. George A. Akerlof & Rachel E. Kranton, 2000. "Economics And Identity," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 715-753, August.
  34. Miles Cahill, 2005. "Is the Human Development Index Redundant?," Eastern Economic Journal, Eastern Economic Association, vol. 31(1), pages 1-5, Winter.
  35. 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.
  36. 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.
  37. La Ferrara, Eliana & Alesina, Alberto, 2005. "Preferences for Redistribution in the Land of Opportunities," Scholarly Articles 4552533, Harvard University Department of Economics.
  38. Andrea Patacconi & Florian Ederer, 2005. "Interpersonal Comparison, Status and Ambition in Organisations," Economics Series Working Papers 222, University of Oxford, Department of Economics.
  39. Hongyi Li & Lyn Squire & Tao Zhang & Heng-fu Zou, 1999. "A Data Set on Income Distribution," CEMA Working Papers 575, China Economics and Management Academy, Central University of Finance and Economics.
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:zbw:aluord:132. 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: (ZBW - German National Library of Economics)

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.