Mounting evidence shows that people’s self-reported life satisfaction (LS) is negatively related to income inequality. Under the interpretation that the relationship between macro-level variables and LS reflects individuals’ social preferences, this finding indicates that most people display inequality-averse preferences. We explore the relationship between self-reports on inequality aversion and LS in a citywide representative survey/experiment conducted in Spain. If self-reported well-being can be used to infer people’s social preferences, LS should correlate negatively with both “envy” and “compassion” scores (i.e., how much one suffers from disadvantageous and advantageous inequality, respectively). We find that LS relates negatively to envy but positively to compassion, which would imply that suffering from observing poorer others, paradoxically, increases well-being. Using an incentivized Dictator Game as a measure of generous behavior, we reject the hypothesis that the positive link between compassion and LS is actually driven by generosity. We discuss how these findings could indicate that the way LS is used to assess social preferences in the population should be revised.
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Yet the income distribution can matter for self-regarding individuals as well. Indeed, from the point of view of narrow self-interest, the prospect of being in a different position of the income scale in the future may affect well-being depending on how likely the different scenarios are (e.g., how much social mobility exists in a society) and how risk-averse the individual is (see, e.g., Hirschman and Rothschild 1973; Alesina et al. 2004; Senik 2004, 2008). Accordingly, “behind the veil of ignorance”, a selfish individual’s “inequality aversion” is identical to her risk aversion and is therefore measured by the concavity of the utility function (Mas-Collel et al. 1995). Inequality may also be regarded as negative for self-interest if it is perceived to be linked to an increase of criminal activities, insecurity and the like (Elgar and Aitken 2010; Delhey and Dragolov 2014). However, self-interest cannot account for the whole range of empirical results on the relationship between income distribution and well-being (e.g., Clark and D'Ambrosio 2014; Ferrer-i-Carbonell and Ramos 2014).
The expression “on average” refers here to the comparison with an “average” other, that is, to the sign of the first derivative of the utility function with respect to others’ income. However, when comparisons are perceived asymmetrically it should be noted that, for constant values of both alpha and beta, the likelihood of being (“on average”) competitive decreases with income rank as does the relative frequency of disadvantageous comparisons. See the Electronic Supplementary Material for further details.
The question was as follows: “You think that success in life depends mostly on (only one option): (a) Luck; (b) Effort”.
The question was as follows: “Generally speaking, do you believe that: (a) Most people can be trusted; (b) You must be very prudent when interacting with people”.
The question was: “Using the scale appearing on the card, how much trust do you have in the public administration?: none at all, not very much, quite a lot, a great deal, hard to answer”.
The questions were as follows: “Are you a member of a voluntary organization—for example the Red Cross, an NGO, political party, sports club, church choir, economic association…? Yes, No”.
(If s/he is a member):
“How many hours do you spend on this kind of activity per week?”.
The question was as follows: “At this point, you have to answer if you agree or disagree with the following statements on a scale between 1 and 7 like the one on the card. 1 means that you completely disagree and 7 means that you completely agree while 4 is the neutral point.
I think I am a valuable person, at least in comparison with others. (self-esteem 1)
I think I have many good characteristics. (self-esteem 2)
I am capable of doing things as well as other people do. (self-esteem 3)
I have a positive attitude towards myself. (self-esteem 4)”
Construct validity was established using factor analysis and internal consistency was determined by the Cronbach alpha statistical test: the instrument showed a Cronbach alpha of 0.75, which is considered appropriate.
Note that due to the observed distribution of choices, such a classification leaves 53% of participants with an above-median score in envy (i.e., all those respondents scoring above the minimum level—category 1: “completely disagree”) and 42% with an above-median score in compassion (i.e., categories 5–7).
For the sake of brevity, here we do not report the coefficients of the control variables since they are very similar to those shown in Table 3. The complete regressions can be found in Table A3 of the Electronic Supplementary Material.
Note that if we define individual preferences as “equality seeking” instead of inequality averse, in the sense that full inequality acts as the baseline situation and any departure from it (towards more equality) increases the utility obtained from one’s own payoff, the predicted relationship of LS with either alpha or beta would be positive rather than negative, but never of opposite signs.
Moreover, as we discuss in the Electronic Supplementary Material, pure competitive preferences predict a strong negative correlation between beta and alpha, but we find their relationship to be non-significant.
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This paper has benefited from comments by Filippos Exadaktylos, Francisco Gómez García and Hannes Schwandt. Thanks are also due to Pablo Brañas-Garza for encouraging this project and for his valuable suggestions. Financial support from the Spanish Ministry of Economy and Competitiveness (ECO2013-44879-R) and the Government of Andalusia Project for Excellence in Research (P12.SEJ.01436) is gratefully acknowledged.
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Espín, A.M., Moreno-Herrero, D., Sánchez-Campillo, J. et al. Do Envy and Compassion Pave the Way to Unhappiness? Social Preferences and Life Satisfaction in a Spanish City. J Happiness Stud 19, 443–469 (2018). https://doi.org/10.1007/s10902-016-9828-8
- Dictator game
- Inequality aversion
- Life satisfaction