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On the relation between income inequality and happiness: Do fairness perceptions matter?

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

Abstract

In this paper, we revisit the association between happiness and inequality. We argue that the perceived fairness of the income generation process affects this association. Building on a two-period model of individual life-time utility maximization, we predict that persons with higher perceived fairness will experience higher levels of life-time utility and are less in favor of income redistribution. In societies with a high level of actual social mobility, income inequality is perceived more positively with increased expected fairness. The opposite is expected for countries with low actual social mobility, due to an increasing relevance of a disappointment effect resulting from unsuccessful individual investments. Using the World Values Survey data and a broad set of fairness measures, 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 disappointment effect in low social mobility countries. In contrast, the results for high-mobility countries turn out to be ambiguous.

Suggested Citation

  • Bjørnskov, Christian & Dreher, Axel & Fischer, Justina A. V. & Schnellenbach, Jan, 2009. "On the relation between income inequality and happiness: Do fairness perceptions matter?," Center for European, Governance and Economic Development Research Discussion Papers 91, University of Goettingen, Department of Economics.
  • Handle: RePEc:zbw:cegedp:91
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    Cited by:

    1. Arne Feddersen & Wolfgang Maennig, 2013. "Mega-Events And Sectoral Employment: The Case Of The 1996 Olympic Games," Contemporary Economic Policy, Western Economic Association International, vol. 31(3), pages 580-603, July.
    2. Franziska K. Kruse & Wolfgang Maennig, 2017. "The future development of world records," Working Papers 061, Chair for Economic Policy, University of Hamburg.
    3. Falch, Torberg & Fischer, Justina A.V., 2012. "Public sector decentralization and school performance: International evidence," Economics Letters, Elsevier, vol. 114(3), pages 276-279.
    4. Simone Schneider, 2012. "Income Inequality and its Consequences for Life Satisfaction: What Role do Social Cognitions Play?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 106(3), pages 419-438, May.
    5. Gabriel M. Ahlfeldt & Wolfgang Maennig & Felix J. Richter, 2017. "Zoning in reunified Berlin," Working Papers 059, Chair for Economic Policy, University of Hamburg.
    6. Wolfgang Maennig, 2017. "Public Referenda and Public Opinion on Olympic Games," Working Papers 057, Chair for Economic Policy, University of Hamburg.
    7. Luciana Méndez, 2017. "So dissatisfied to leave? The role of perceptions, expectations and beliefs on youths’ intention to migrate," Documentos de Trabajo (working papers) 17-12, Instituto de Economía - IECON.
    8. Wolfgang Maennig, 2017. "Governance in Sports Organizations," Working Papers 060, Chair for Economic Policy, University of Hamburg.
    9. Fischer, Justina AV & Sousa-Poza, Alfonso, 2010. "The impact of institutions on firms’ rejuvenation policies: Early retirement with severance pay versus simple lay-off. A Cross-European Analysis," MPRA Paper 20343, University Library of Munich, Germany.
    10. Fischer, Justina AV, 2009. "The Welfare Effects of Social Mobility: An Analysis for OECD countries," MPRA Paper 17070, University Library of Munich, Germany.
    11. Wolfgang Maennig, 2017. "Major Sports Events: Economic Impact," Working Papers 058, Chair for Economic Policy, University of Hamburg.

    More about this item

    Keywords

    Happiness; life satisfaction; subjective well-being; inequality; income distribution; redistribution; political ideology; justice; fairness;

    JEL classification:

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

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