Hardship and Happiness

Carol Graham and Stefano Pettinato

World Economics, 2000, vol. 1, issue 4, 73-112

Abstract: This paper focuses on an age-old puzzle: why some societies peacefully tolerate high levels of inequality and others do not. The authors posit that opportunity and mobility over time are as important as current distributions are to the explanation. Assessments of past mobility and future expectations are as important as objective trends. An analyze of data for Latin America compares subjective assessments with objective trends during a period of volatility and policy change. It was found that relative incomes matter as much as absolute ones. Expectations of future upward mobility were higher in countries with more inequality. Upwardly mobile people were more critical in their self assessments than were less mobile people. Collective memory of macroeconomic volatility was critical to subjective assessments of future prospects: those countries with recent crises and reforms had the highest levels of support for market policies. The effects of expectations on self-assessments have methodological and analytical implications for political economy research.

Date: 2000
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