Rising Income Inequality During the Great Recession Had No Impact on Subjective Wellbeing in Europe, 2003–2012

Abstract

The Great Recession increased income inequality by an average of 6%. We assesses the impact of that on subjective wellbeing (happiness, life satisfaction). Data: European Quality of Life survey, 25 representative national samples at three time points, over 70,000 respondents. Analysis: variance-components multi-level models controlling for GDP per capita (an essential point) and individual-level predictors. Findings: income inequality has no statistically significant impact before, during, or after the Great Recession. Instead (contrary to much previous research) a straightforward individualistic utilitarian–materialist understanding is supported: money does increase wellbeing but inequality itself—the gap between rich and poor—is irrelevant.

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Fig. 1

Notes

  1. 1.

    In developing nations, there is a complication in that inequality may signal new opportunities opening, thereby raising hope for the future, hence making people happier.

  2. 2.

    This round was originally scheduled for 2007 and is sometimes referred to as the 2007 survey, but most of the surveys were conducted in 2008 (Eurofound 2016), so we will label it the "2008 wave".

  3. 3.

    The small number of countries does not allow us to assess these other contextual effects. The combined effect of all of them together shows up in our model's intercept.

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Appendices

Appendix 1: Details by Nation

See Table 6.

Table 6 Mean life satisfaction and happiness by nation

Appendix 2: Linearity

Inequality and Well-Being

The relation between inequality as measured by the Gini coefficient and wellbeing is, to a very close approximation, linear. Figure 2 shows the relationship between the Gini coefficient for each of the surveys and the mean level of well-being in each, separately for the three waves (Wave 1 around 2003, Wave 2 around 2008, and Wave 3 in 2012. The quadratic fit line and its 95% confidence interval is shown but the curvature is so small (t = 0.022, n.s. for the quadratic component) that it appears straight.

Fig. 2
figure2

Is the relationship between Gini and well-being linear? Each survey separately and quadratic fit with confidence bands

Figure 2 corresponds to the simple bivariate Model 1 in Table 3 and, like it, suggests that inequality is associated with lower well-being before confounding factors are taken into account. Well-being is systematically high in relatively egalitarian nations (France, Germany, Slovenia, the Czech Republic) and lowest in the least egalitarian nations, notably Turkey and perhaps Macedonia. It is anomalously high—well outside the 95% confidence band—in the very equalitarian Scandinavian welfare states (Denmark, Sweden, Finland, and possibly—insofar as its single survey is representative—in Norway). It is anomalously low in Bulgaria (especially in waves 1 and 2) and several other formerly Communist nations.

Are There Curvilinear Effects of Gini When GDP is Controlled?

While inequality as measured by the Gini coefficient has only a linear bivariate relation to well-being (as we have seen in Fig. 2, above), it is possible that there could be an underlying curvilinearity which is masked by the strong effect of GDP. We test for this possibility with the regression equation (applied to the same aggregate data we have been working with):

$${\text{Wellbeing}} = {\text{Gini}} + {\text{GiniSquared}} + {\text{GDP}} + {\text{e}}$$
(1)

In the event GDP of course matters greatly. But Gini and its square do not have a statistically significant effect: F(2, 76) = 2.09, p = 0.13).

Thus, there does not seem to be a masked curvilinear effect.

GDP and Well-Being

The relation between GDP per capita and well-being is approximately linear. Figure 3 shows the relationship GDP for each of the surveys and the mean level of well-being in each, separately for the three waves. The quadratic fit line and its 95% confidence interval is shown but the curvature is small and statistically insignificant (t = −0.92, n.s. for the quadratic component).

Fig. 3
figure3

Is the relationship between GDP per capita and well-being linear? Each survey separately and quadratic fit with confidence bands

Well-being rises systematically (and strongly: r = 0.82) from the poorest nations in the study (Turkey, Estonia, Latvia) to the richest (Belgium, Netherlands, Norway). It is anomalously low in Bulgaria. The Scandinavian nations (except for Norway and Sweden in wave 3) may be anomalously high.

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Evans, M.D.R., Kelley, J., Kelley, S.M.C. et al. Rising Income Inequality During the Great Recession Had No Impact on Subjective Wellbeing in Europe, 2003–2012. J Happiness Stud 20, 203–228 (2019). https://doi.org/10.1007/s10902-017-9917-3

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Keywords

  • Subjective wellbeing
  • Life satisfaction
  • Happiness
  • Utility
  • Great Recession
  • Inequality
  • Europe
  • Income
  • GDP per capita
  • Multi-level models
  • Well-being
  • Quality of life
  • Socioeconomic development
  • Income inequality
  • Poverty