Bjornskov, Christian and Dreher, Axel and Fischer, Justina AV and Schnellenbach, Jan (2010): Inequality and happiness: When perceived social mobility and economic reality do not match.
Download (248kB) | Preview
In this paper, we revisit the association between happiness and inequality. We argue that the interaction between the perceived and the actual fairness of the income generation process affects this association. Building on a simple model of individual labor-market participation under uncertainty, we predict that higher levels of perceived fairness cause higher levels of utility, and lower preferred levels of income redistribution. In societies with a low level of actual social mobility, income inequality is perceived more negatively with increased perceived fairness, due to the need for unexpected policy changes as a response to many unsuccessful investments of overly optimistic individuals. This effect becomes smaller as actual social mobility increases. Using data on happiness and a broad set of fairness measures from the World Values Survey, 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 countries with low social mobility. Consistent with our theoretical model, the results for high-mobility countries turn out to be ambiguous.
|Item Type:||MPRA Paper|
|Original Title:||Inequality and happiness: When perceived social mobility and economic reality do not match|
|Keywords:||Happiness; life satisfaction; subjective well-being; inequality; income distribution; redistribution; political ideology; justice; fairness; World Values Survey|
|Subjects:||J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J62 - Job, Occupational, and Intergenerational Mobility
H - Public Economics > H4 - Publicly Provided Goods > H40 - General
D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions
I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I31 - General Welfare, Well-Being
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:||15. Oct 2010 00:22|
|Last Modified:||22. May 2015 20:51|
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, 17 October 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., 2009a. Subjective Well-Being as Welfare Measure: Concepts and Methodology, MPRA Paper 16619, University Library of Munich, Germany.
Fischer, J.A.V., 2009b, The Welfare Effects of Social Mobility, OECD Social, Employment and Migration Working Papers 93, OECD, Directorate for Employment, Labour and Social Affairs.
Fischer, J.A.V., 2009c, Happiness and Age Cycles – Return to Start...?: On the Functional Relationship between Subjective Well-being and Age, OECD Social, Employment and Migration Working Papers 99, 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.
Piketty, T., 1995, Social Mobility and Redistributive Politics, Quarterly Journal of Economics 110: 551-584.
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.