Inequality and Happiness: When Perceived Social Mobility and Economic Reality do not Match

Christian Bjørnskov, Axel Dreher, Justina A. V. Fischer and Jan Schnellenbach

No 3216, CESifo Working Paper Series from CESifo

Abstract: In this paper, we revisit the association between happiness and inequality. We argue that the interaction between the perceived and the actual fairness of the income generation process affects this association. Building on a simple model of individual labor-market participation under uncertainty, we predict that higher levels of perceived fairness cause higher levels of utility, and lower preferred levels of income redistribution. In societies with a low level of actual social mobility, income inequality is perceived more negatively with increased perceived fairness, due to the need for unexpected policy changes as a response to many unsuccessful investments of overly optimistic individuals. This effect becomes smaller as actual social mobility increases. Using data on happiness and a broad set of fairness measures from the World Values Survey, we find strong support for the negative (positive) association between fairness perceptions and the demand for more equal incomes (subjective wellbeing). We also find strong empirical support for the disappointment effect in countries with low social mobility. Consistent with our theoretical model, the results for high-mobility countries turn out to be ambiguous.

Keywords: happiness; life satisfaction; subjective well-being; inequality; income distribution; redistribution; political ideology; justice; fairness; World Values Survey (search for similar items in EconPapers)
JEL-codes: D31 H40 I31 J62 Z13 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Inequality and happiness: When perceived social mobility and economic reality do not match (2013)
Working Paper: Inequality and happiness: When perceived social mobility and economic reality do not match (2013)
Working Paper: Inequality and happiness: When perceived social mobility and economic reality do not match (2013)
Working Paper: Inequality and happiness: When perceived social mobility and economic reality do not match (2010)
Working Paper: Inequality and happiness: When perceived social mobility and economic reality do not match (2010)
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