The Effect of Income Inequality on Happiness Inequality in India: A Recentered Influence Function Regression Estimation and Life Satisfaction Inequality Decomposition

Abstract

It is now an accepted stylised fact that increase in happiness level in any country is not commensurate with growth in income, a puzzle known as Easterlin Paradox. This paper analyses the income-happiness relationship in India and tries to explain the flat happiness response to income change in terms of rising income inequality. Income growth propels inequality and so also inequality in well-being. Empirically the effects of income inequality, absolute income, relative income, rank position and social capital indices are analysed using World Value Survey data for 12 states of India over 24 years from 1990 to 2014. As the variation in the 10-point scale measure of life satisfaction level is narrow, an recentered influence function (RIF) regression of variance and Gini of life satisfaction are estimated. The life satisfaction inequality is decomposed into composition and coefficients effects using Blinder–Oaxaca (B–O) decomposition method. The estimated RIF coefficients reveal significant effects on life satisfaction inequality of various income measures and social capital indices. The B–O decomposition shows that the functional relationship between material aspirations and life satisfaction, contribute significantly to rising life satisfaction inequality relative to changes over time in happiness influencing factors. Reducing income inequality and improving trust, sociability, health, education and employment over time and space could reduce life satisfaction inequality and improve happiness level in India.

Impact of socioeconomic conditions on happiness: Evidence from emerging market economies

“…However, for Indians, per capita income negatively influences happiness. This finding supports the result of Lakshmanasamy and Maya (2020), who found that happiness is not increased with the increased income across Indian states. Inequalities in life satisfaction and income, regional differences, increasing aspirations, and status consciousness are the possible causes of reduced happiness in India.…”

Determinant of Macro-Economics: Does Income Inequality Influence Happiness? Evidence From Indonesia

“…The empirical result revealed that the growth of income indicates able to reduce such happiness inequality in Germany. That is to say, the more income inequality decrease, the more society's happiness increase (Becchetti, Masaari, & Naticchioni, 2014), this finding was consistent through the research of ( Lakshmanasamy & Maya, 2020). While some empirical studies which produce that there is positive association between income inequality and happiness are (Haller & Hadler, 2006;Helliwel & Huang;ect, Zagorsk, & Piotrowska, 2014), which revealed that income inequality increase such happiness, evidence from China through its effects on rural resident, who are optimistic about their life.…”

Life Satisfaction and Well-Being at the Intersections of Caste and Gender in India

“…Hence, it may show SC individuals' heightened fear of downward mobility as opposed to their higher caste colleagues (Iversen et al, 2016). The combination of these trends makes persons of lower castes more prone to unemployment and downward social mobility, which in turn might lead to worse well-being and life satisfaction outcomes (Bartelink et al, 2020;Lakshmanasamy & Maya, 2020;Sinha, 2018), which is also congruent in the authors' findings.…”