Fairness and inequality tolerance: Evidence from the Life in Transition Survey

Alexandru Cojocaru

Journal of Comparative Economics, 2014, vol. 42, issue 3, 590-608

Abstract: This paper examines the link between inequality and individual well-being using household survey data from 27 transition economies, where income inequality increased considerably since 1989. A test of inequality aversion in individual preferences that draws on the Fehr and Schmidt (1999) specification of inequality aversion is proposed, and the difficulties of implementing it in a non-experimental setting are discussed. Estimates based on this model confirm aversion to inequality among individuals both in the pooled sample and separately among the EU and non-EU countries. The Gini index, on the other hand, is unable to capture this negative effect of inequality on well-being. Notably, inequality aversion is not intrinsic. Rather, it appears to be tied to a concern with the fairness of the institutions underlying the distribution of fortunes in society. The evidence is suggestive of inequality of opportunity driving attitudes toward overall inequality.

Keywords: Inequality aversion; Relative deprivation; Subjective well-being; Transition economies (search for similar items in EconPapers)
JEL-codes: D63 I32 P20 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:42:y:2014:i:3:p:590-608

DOI: 10.1016/j.jce.2014.01.003

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