Inequality, Happiness and Relative Concerns: What Actually is their Relationship?

Ed Hopkins

No 2008-01, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

Abstract: This paper briefly and informally surveys different theoretical models of relative concerns and their relation to inequality. Models of inequity aversion in common use in experimental economics imply a negative relation between inequality and happiness. In contrast, empirical studies on happiness typically employ models of relative concerns that assume that increases in others’ income always have a negative effect on own happiness. However, in these latter models, the relation between inequality and happiness can be positive. One possible solution is a rivalry model where a distinction is made between endowment and reward inequality which have respectively a negative and positive effect on happiness. These different models and their contrasting results may clarify why the empirical relationship between inequality and happiness has been difficult to establish.

Keywords: inequality; relative position; social preferences; tournaments; evolution (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (97)

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Journal Article: Inequality, happiness and relative concerns: What actually is their relationship? (2008)
Working Paper: Inequality, Happiness and Relative Concerns: What Actually is their Relationship? (2008)
Working Paper: Inequality, Happiness and Relative Concerns: What Actually is their Relationship? (2008)
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