Bjornskov, Christian and Dreher, Axel and Fischer, Justina AV and Schnellenbach, Jan (2009): On the relation between income inequality and happiness: Do fairness perceptions matter?
Download (321kB) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||On the relation between income inequality and happiness: Do fairness perceptions matter?|
|Keywords:||Happiness; life satisfaction; subjective well-being; inequality; income distribution; redistribution; political ideology; justice; fairness; World Values Survey|
|Subjects:||D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions
H - Public Economics > H4 - Publicly Provided Goods > H40 - General
J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J62 - Job, Occupational, and Intergenerational Mobility
I - Health, Education, and Welfare > I3 - Welfare and Poverty > I31 - General Welfare
Z - Other Special Topics > Z1 - Cultural Economics; Economic Sociology; Economic Anthropology > Z13 - Economic Sociology; Economic Anthropology; Social and Economic Stratification
|Depositing User:||Justina AV Fischer|
|Date Deposited:||22. Dec 2009 07:21|
|Last Modified:||14. Feb 2013 01:34|
Alesina, A., R. DiTella and R. MacCulloch, 2004, Inequality and Happiness: Are Europeans and Americans Different? Journal of Public Economics 88: 2009-2042.
Alesina, A. and E. La Ferrara, 2005, Preferences for redistribution in the land of opportunities, Journal of Public Economics 89: 897-931.
Bergh, A., 2005, On the Counterfactual Problem of Welfare State Research: How Can We Measure Redistribution? European Sociological Review 21, 4: 345-357.
Bjørnskov, C., A. Dreher and J.A.V. Fischer, 2008, Cross-country determinants of life satisfaction: Exploring different determinants across groups in society, Social Choice and Welfare 30: 119-173.
Blanchflower, D.G. and A.J. Oswald, 2004, Well-Being Over Time in Britain and the USA, Journal of Public Economics 88: 1359-1386.
Clark, A.E., P. Frijters and M. Shields, 2008, Relative Income, Happiness, and Utility: An Explanation for the Easterlin and Other Puzzles, Journal of Economic Literature 46: 95-144.
Clark, A. and E. D’Angelo, 2008, Upward Social Mobility, Wellbeing and Political Preferences: Evidence from the BHPS, working paper, Paris School of Economics, 2008.
Corneo, G. and H.P. Gruener, 2002, Individual preferences for political redistribution, Journal of Public Economics 83: 83-107.
Diener, E., R.E. Lucas, U. Schimmack and J. Helliwell, 2008, Well-Being for Public Policy, Oxford, UK: Oxford University Press.
Dohmen, Th., A. Falk, D. Huffman, F. Marklein and U. Sunde, 2009, Biased Probability Judgment: Evidence of Incidence and Relationship to Economic Outcomes from a Representative Sample, Journal of Behavioral Organization, forthcoming.
Fehr, E. and K.M. Schmidt, 1999, A theory of fairness, competition, and cooperation, Quarterly Journal of Economics 114: 817-868.
Ferrer-i-Carbonell, A. and P. Frijters, 2004, How Important is Methodology for the Estimates of the Determinants of Happiness? The Economic Journal 114: 641–659.
Fischer, J.A.V., 2009, The Welfare Effects of Social Mobility, OECD Social, Employment and Migration Working Papers 93, OECD, Directorate for Employment, Labour and Social Affairs.
Freedom House, 2007, Freedom in the World Country Ratings. Frey, B. and A. Stutzer, 2005, Beyond outcomes: measuring procedural utility, Oxford Economic Papers 57: 90-111.
Grosfeld I. and C. Senik, 2009, The emerging aversion to inequality - Evidence from long subjective data, PSE Working Papers 2008-19, PSE (Ecole normale supérieure).
Gwartney, J. and R. Lawson, 2008, Economic Freedom of the World: 2008 Annual Report.
Hayek, F.A., 1944, The Road to Serfdom, Chicago: University of Chicago Press.
Hopkins, E., 2008, Inequality, Happiness and Relative Concerns: What Actually is their Relationship? Journal of Economic Inequality 6: 351-372.
Hirschman, A. and M. Rothschild, 1973, The changing tolerance for income inequality in the course of economic development, Quarterly Journal of Economics 87: 544-566.
Inglehart, R., M. Basañez, J. Díez-Medrano, L. Halman and R. Luijkx, 2004, Human Beliefs and Values, Ann Arbor: University of Michigan Press.
Layard, R., G. Mayraz and S. Nickell, 2009, Does Relative Income Matter ? Are the Critics Right? CEP Discussion Paper No 918, March 2009.
Lerner, A., 1944, The economics of control: principles of welfare economics, New York: MacMillan.
Mitchell, G., P.E. Tetlock, B.A. Mellers and L.D. Ordóñez, 1993, Judgments of social justice: compromises between equality and efficiency, Journal of Personality and Social Psychology 65: 629-639.
Ravillion, M. and M. Lokshin, 2000, Who wants to redistribute? The tunnel effect in 1990s Russia, Journal of Public Economics 76: 87-104.
Roemer, J.E., 1998, Theories of distributive justice, Harvard University Press: 1998.
Scott, J.T., R.E. Matland, P.A. Michelbach and B.H. Bornstein, 2001, Just deserts: an experimental study of distributive justice norms, American Journal of Political Science 45: 74-767.
Stutzer, A., and B.S. Frey, 2003, Institutions Matter for Procedural Utility: An Economic Study of the Impact of Political Participation Possibilities, in: R. Mudambi et al. (eds.), Economic Welfare, International Business and Global Institutional Change, Edward Elgar, Cheltenham, 81-99.
UNU, 2006, World income inequality database v2.0. Helsinki: United Nations University-World Institute for Development Economics Research.
Veblen, T., 1899, The Theory of the Leisure Class, New York: MacMillan.
Veenhoven, R., 2000, The four qualities of life: Ordering concepts and measures of the good life, Journal of Happiness Studies 1: 1-39.