Skip to main content
SpringerLink
Log in

Inequality and Happiness

  • Living reference work entry
  • First Online:
Handbook of Labor, Human Resources and Population Economics

  • 288 Accesses

Abstract

The happiness literature empirically shows that individuals are happier not necessarily if they live in a country with high economic growth, but most important if they live in cohesive societies, with more equality (not only in terms of income), less poverty, higher social capital, and jobs for everybody. This chapter relates to this literature and examines the link between inequality and happiness or life satisfaction. Section “Inequality and Happiness” presents a literature review on the correlation between inequality and happiness. In the review, special attention is given to the mechanisms that explain preferences for equality. Although the income inequality literature has emphasized the distinction between objective inequality (e.g., measured with the Gini) and perceived inequality, the happiness literature has not considered this distinction. Nevertheless, one would expect individuals to show a stronger correlation between perceived, rather than with objective, inequality and well-being, preferences, and behavior. Section “Inequality and Happiness” briefly discusses this. Section “Happiness Inequality” describes first the incipient literature on happiness or life satisfaction inequality trends, which is mostly descriptive. While policy makers and researchers have focused on income (and, to a lesser extent, health) inequality, the distribution of happiness has been largely ignored. Nevertheless, happiness distribution is a relevant measure of welfare and should be on the agenda of policy makers. In this literature, happiness inequality is typically measured with the standard deviation, an inequality index thought for cardinal variables. A priory this is an important shortcoming as happiness is measured as an ordinal discrete variable. Therefore, it is of crucial importance to analyze the impact of measuring happiness inequality by means of indices designed for ordinal measures. This chapter contributes to the happiness literature by presenting the first empirical study that, using data on 56 countries, measures happiness inequality with 20 different indices designed for ordinal data and compares them with the standard deviation by means of rank correlations.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution

Institutional subscriptions

References

  • Abdul Naga R, Yalcin T (2008) Inequality measurement for ordered response health data. J Health Econ 27:1614–1625

    Article  Google Scholar 

  • Alesina A, Giuliano P (2011) Preferences for redistribution. In: Bisin A, Benhabib J (eds) Handbook of social economics. North Holland, Amsterdam, pp 93–132

    Google Scholar 

  • Alesina A, La Ferrara E (2005) Preferences for redistribution in the land of opportunities. J Public Econ 89:897–931

    Article  Google Scholar 

  • Alesina A, Di Tella R, MacCulloch R (2004) Inequality and happiness: are Europeans and Americans different? J Public Econ 88:2009–2042

    Article  Google Scholar 

  • Alesina A, Stantcheva S, Teso E (2018) Intergenerational mobility and preferences for redistribution. Am Econ Rev 108(2):521–554

    Article  Google Scholar 

  • Allison RA, Foster JE (2004) Measuring health inequality using qualitative data. J Health Econ 23:505–524

    Article  Google Scholar 

  • Alvaredo F, Chancel L, Piketty T, Saez E, Zucman G (2018) World inequality report 2018. https://wir2018.wid.world/files/download/wir2018-full-report-english.pdf

  • Apouey B (2007) Measuring health polarization with self-assessed health data. Health Econ 16:875–894

    Article  Google Scholar 

  • Becchetti L, Massari R, Naticchioni P (2014) The drivers of happiness inequality: suggestions for promoting social cohesion. Oxf Econ Pap 66:419–442

    Article  Google Scholar 

  • Bjornskov C, Dreher A, Fischer JAV, Schnellenbach J, Gehring K (2013) Inequality and happiness: when perceived social mobility and economic realty do not match. J Econ Behav Organ 91:75–92

    Article  Google Scholar 

  • Blanchflower D, Oswald A (2003) Does inequality reduce happiness? Evidence from the states of the USA from the 1970s to the 1990s. Mimeo retrieved from Professor Oswald’s webpage

    Google Scholar 

  • Bussolo M, Ferrer-i-Carbonell A, Giolbas A, Torre I (2021) I perceive therefore i demand: the formation of inequality perceptions and demand for redistribution. Rev Income Wealth forthcoming

    Google Scholar 

  • Clark A, D’Ambrosio C (2015) Attitudes to income inequality: experimental and survey evidence. In: Atkinson A, Bourguignon F (eds) Elsevier handbook of income distribution, vol 2A, pp 1147–1208. Chapter 13

    Google Scholar 

  • Clark AE, Flèche S, Senik C (2015) Economic growth evens out happiness: evidence from six surveys. Rev Income Wealth 62(3):405–419

    Article  Google Scholar 

  • Cowell FA, Flachaire E (2017) Inequality with ordinal data. Economica 84:290–321

    Article  Google Scholar 

  • DeNeve J-E, Keulenaer FD, Kavetsos G, Norton M, Landeghem BV, Ward G (2018) The asymmetric experience of positive and negative economic growth: global evidence using subjective well-being

    Google Scholar 

  • Dutta I, Foster J (2013) Inequality of happiness in US: 1972–2008. Rev Income Wealth 59:393–415

    Article  Google Scholar 

  • Fehr D, Rau H, Trautmann ST, Xu Y (2020) Inequality, fairness and social capital. Eur Econ Rev 129:103–166

    Article  Google Scholar 

  • Ferrer-i-Carbonell A, Ramos X (2014) Inequality and happiness. J Econ Surv 28:1016–1027

    Article  Google Scholar 

  • Ferrer-i-Carbonell A, Ramos X (2019) Inequality and happiness. J Econ Surv 28(5):1016–1027

    Google Scholar 

  • Gimpelson V, Treisman D (2018) Misperceiving inequality. Econ Polit 30(1):27–54

    Article  Google Scholar 

  • Goff L, Heliwell JF, Mayraz G (2018) Inequality of subjective wellbeing as a comprehensive measure of inequality. Econ Inq 56:2177–2194

    Article  Google Scholar 

  • Graafland J, Lous B (2018) Economic freedom, income inequality and life satisfaction in OECD countries. J Happiness Stud 19:2017–2093

    Article  Google Scholar 

  • Graham C, Felton A (2006) Inequality and happiness: insights from Latin America. J Econ Inequal 4:107–122

    Google Scholar 

  • Hauser OP, Norton MI (2017) (Mis)perceptions of inequality. Curr Opin Psychol 18:21–25

    Article  Google Scholar 

  • Helliwell JF, Huang H, Wang S (2016) New evidence on trust and well-being. In: Uslaner (ed) The Oxford handbook of social and political turst. Oxford University Press, Oxford, UK

    Google Scholar 

  • Helliwell JF, Huang H, Wang S, Norton M (2020) Social environments for world happiness. In: Helliwell JF, Layard R, Sachs J, De Neve JE (eds) World happiness report 2020. Sustainable Development Solutions Network, New York

    Google Scholar 

  • Jenkins SP (2020) Comparing distributions of ordinal data. Stata J 20(3):505–531

    Google Scholar 

  • Jenkins SP (2021) Inequality comparisons with ordinal data. Rev Income Wealth, early view 67(3):547–563

    Google Scholar 

  • Kalmijn W, Veenhoven R (2005) Measuring inequality of happiness in nations: in search for proper statistics. J Happiness Stud 6:357–396

    Article  Google Scholar 

  • Kollamparambil U (2020) Happiness, happiness inequality and income dynamics in South Africa. J Happiness Stud 21:201–222

    Article  Google Scholar 

  • Lakshmanasamy T, Maya K (2020) The effect of income inequality on happiness inequality in India: a recentered influence function regression estimation and life satisfaction inequality decomposition. Indian J Hum Dev 14(2):161–181

    Google Scholar 

  • Lei X, Shen Y, Smith JP, Zhou G (2018) Life satisfaction in China and consumption and income inequalities. Rev Econ Househ 16(1):75–95

    Article  Google Scholar 

  • Niehues J (2014) Subjective perceptions of inequality and redistributive preferences: an international comparison. Discussion paper: Cologne Institute for Economic Research

    Google Scholar 

  • Norton MI, Ariely D (2011) Building a better America – one wealth quintile at a time. Perspect Psychol Sci 6:9–12

    Article  Google Scholar 

  • Oishi S, Kesebir S, Diener E (2011) Income inequality and happiness. Psychol Sci 22(9):1095–1100

    Article  Google Scholar 

  • Oishi S, Kesebir S (2015) Income inequality explains why economic growth does not always translate to an increase in happiness. Psychol Sci 26(10):1630–1638

    Google Scholar 

  • Powdthavee R, Burkhauser V, DeNeve J-E (2017) Top incomes and human well-being: evidence from the Gallup world poll. J Econ Psychol 62:246–257

    Article  Google Scholar 

  • Sanfey P, Teksoz U (2007) Does transition make you happy? Economics of Transition and Institutional Change (ETIC) (formerly: Economics of Transition, EoT) 15(4):707–773

    Google Scholar 

  • Schalembier B (2019) An evaluation of common explanations for the impact of income inequality on life satisfaction. J Happiness Stud 20:777–794

    Article  Google Scholar 

  • Schwarze J, Härpfer M (2007) Are people inequality averse, and do they prefer redistribution by the state? Evidence from German longitudinal data on life satisfaction. J Behav Exp Econ

    Google Scholar 

  • Senik C, Grosfeld I (2010) The emerging aversion to inequality evidence from subjective data. Economics of Transition and Institutional Change (ETIC) (formerly: Economics of Transition, EoT) 18(1):1–26

    Google Scholar 

  • Stevenson B, Wolfers J (2008) Happiness inequality in the United States. J Leg Stud 37(S2):S33–S79

    Article  Google Scholar 

  • Tavor T, Gonen LD, Weber M, Spiegel U (2018) The effects of income levels and income inequalities on happiness. J Happiness Stud 18:2115–2137

    Article  Google Scholar 

  • Tran T, Nguyen C (2018) Economic inequality and happiness: a quantitative study among the elderly in rural Vietnam. J Happiness Stud 19:781–799

    Article  Google Scholar 

  • Veenhoven R (2005) Return of inequality in modern society? Test by dispersion of life satisfaction across time and nations. J Happiness Stud 6:457–487

    Article  Google Scholar 

  • Verme P (2011) Life satisfaction and income inequality. Rev Income Wealth 57(1):111–127

    Article  Google Scholar 

  • Yu Z, Wang F (2017) Income inequality and happiness: an inverted U-shaped curve. Front Psychol. https://doi.org/10.3389/fpsyg.2017.02052

Download references

Acknowledgments

Responsible Section Editor: Milena Nikolova. The chapter has benefitted from very valuable comments of the editor Milena Nikolova and two anonymous referees. Ada Ferrer-i-Carbonell gratefully acknowledges financial support by the Spanish Ministry of Economy and Competitiveness Grant through project grant ECO2017-88130-P and by the Generalitat de Catalunya through project grant SGR2017-1359. Xavier Ramos gratefully acknowledges financial support by the Spanish Ministry of Economy and Competitiveness Grant through project grant PID2019-104619RB-C43 and by the Generalitat de Catalunya through project grant SGR2017-1571. There is no conflict of interest.

Author information

Authors and Affiliations

  1. Institute of Economic Analysis (CSIC) and Barcelona School of Economics, Bellaterra, Spain

    Ada Ferrer-i-Carbonell

  2. Department of Applied Economics, Universitat Autònoma de Barcelona, Bellaterra, Spain

    Xavi Ramos

Authors
  1. Ada Ferrer-i-Carbonell
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Xavi Ramos
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Ada Ferrer-i-Carbonell .

Editor information

Editors and Affiliations

  1. UNU-MERIT & Princeton University, Maastricht, The Netherlands

    Klaus F. Zimmermann

Section Editor information

  1. Faculty of Economics and Business, Global Economics and Management, University of Groningen, Groningen, The Netherlands

    Milena Nikolova

Rights and permissions

Reprints and permissions

Copyright information

© 2021 Springer Nature Switzerland AG

About this entry

Check for updates. Verify currency and authenticity via CrossMark

Cite this entry

Ferrer-i-Carbonell, A., Ramos, X. (2021). Inequality and Happiness. In: Zimmermann, K.F. (eds) Handbook of Labor, Human Resources and Population Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-57365-6_185-1

Download citation

  • DOI: https://doi.org/10.1007/978-3-319-57365-6_185-1

  • Received:

  • Accepted:

  • Published:

  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-319-57365-6

  • Online ISBN: 978-3-319-57365-6

  • eBook Packages: Springer Reference Economics and FinanceReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences

Publish with us

Policies and ethics

Search

Navigation