Inequality and Happiness: Are Europeans and Americans Different?

Abstract

We study the effect of the level of inequality in society on individual well being using a total of 123,668 answers to a survey question about "happiness". We find that individuals have a lower tendency to report themselves happy when inequality is high, even after controlling for individual income, a large set of personal characteristics, and year and country (or, in the case of the US, state) dummies. The effect, however, appears to be stronger in Europe than in the US. In addition we find a striking difference across groups. In Europe, the poor and those on the left of the political spectrum are unhappy about inequality; whereas in the US the happiness of the poor and of those on the left is uncorrelated with inequality. Interestingly, in the US it is the rich who are especially bothered by inequality. We argue that these findings are consistent with the perception (not necessarily the reality) that Americans have of living in a mobile society, where individual effort can move people up and down the income ladder, while Europeans believe that they live in less mobile societies.

The Relative Utility Hypothesis With and Without Self-Reported Reference Wages

“…The results suggest that a one-standard-deviation increase in a worker's own wage would lead to an increase in happiness of 0.13 standard deviations. This finding is reminiscent of the conclusion by Alesina et al (2004) that "money buys happiness." Given that the impact of absolute wages on subjective well-being is stronger than that of relative wages, an across-the-board wage hike of, say, 10 percent would be associated with an overall increase in reported happiness.…”

Local neighbors as positives, regional neighbors as negatives: Competing channels in the relationship between others’ income, health, and happiness

“…This is in line with Hirschman & Rothschild (1973) It should be noted that while we use the median of the income distribution in respondents' geographic areas as reference income, there is no reason to assume that only the first moment of the distribution is related to well-being. A substantial literature concerns the relationship between income inequality and SWB (e.g., Alesina et al, 2004;Graham & Felton, 2006;Oishi et al, 2011;Van Praag & Ferrer-i-Carbonell, 2009). While it is shown in Section 5.5 that the baseline results hold controlling for ZIPcode and MSA Gini coefficients, the current paper does not present a thorough analysis of the income-inequality-SWB relationship.…”

Identity, Inequality, and Happiness: Evidence from Urban China

“…Most past research has concluded that relative deprivation, or inequality, will lead to lower happiness. Alesina et al (2004) found that the poor in America faced with income inequality do not report high happiness scores, whereas inequality reduces happiness in Europe, especially for those with leftist views. Both McBride (1998) andLuttmer (2005) find a between-group inequality in nature, and it is regarded as a more influential element than "vertical inequality" (for example, income Gini coefficient) in determining social conflicts and long-term growth (Stewart, 2001;Stewart et al, 2005;Stewart and Langer, 2007).…”