nep-hap New Economics Papers
on Economics of Happiness
Issue of 2023‒03‒27
one paper chosen by

  1. Inequality and happiness: the role of income versus wealth inequality By Katarzyna Sałach-Dróżdż

  1. By: Katarzyna Sałach-Dróżdż (University of Warsaw, Faculty of Economic Science)
    Abstract: There are conflicting theories about whether individuals like or dislike inequality, or in other words, whether living in an unequal country increases or decreases their subjective well-being. The empirical literature has also not yet reached a consensus. In this paper, we add a new perspective to the inequality-happiness puzzle. First, we study not only income inequality, but also wealth inequality, which has so far been overlooked in the happiness literature. Second, we reach beyond the usually studied Gini coefficient and top income shares, looking also at the other parts of income or wealth distribution. Using data from the integrated World Values Surveys and European Values Surveys for over 50 countries, matched with World Inequality Database data over the years 1981-2020, we find that individuals are happier with increases in the top 10% and top 1% shares of wealth and less happy with increases in the middle 40% share of either wealth or pre-tax income. Increasing the bottom 50% share of after-tax income also makes individuals happier, suggesting that they favor income redistribution. We offer possible explanations for these findings.
    Keywords: income inequality, wealth inequality, happiness, subjective well-being, life satisfaction
    JEL: D31 D63 I31
    Date: 2023

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