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Income Inequality and Subjective Well-being: A Cross-National Study on the Conditional Effects of Individual and National Characteristics

Abstract

In this study we raise the question how a nation’s income inequality affects subjective well-being. Using information on 195,091 individuals from 85 different countries from the World Value Surveys and the European Value Surveys, we established that in general, people living in more unequal countries report higher well-being than people from more equal countries. This association however does not apply to all people similarly. First, the positive effect of a nation’s income inequality is weaker when individuals express more social and institutional trust, and underscore egalitarian norms to a larger extent. Second, the positive association between national income inequality and subjective well-being is less strong for people from countries with high levels of social and institutional trust. So, our research predominantly indicates that there are far-reaching effects of an individual’s and a nation’s trust on people’s well-being.

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Notes

  1. 1.

    We are aware of the different connotations of the terms subjective well-being, happiness, satisfaction, and quality of life. These factors, however, seem highly correlated and are often used as interchangeable (Veenhoven 1984, 2008). Especially in happiness research this seems standard practice (e.g. Easterlin 2001; Alesina et al. 2004; Verme 2011).

  2. 2.

    Multilevel estimates with an additional random error were used to calculate imputed values. To maintain the same scaling, we used the restriction that the estimates could not become smaller than 0 or larger than 7. We presume single level imputations are justified because of the high correlation between both items (r = .809).

  3. 3.

    To test whether the assumptions underlying multilevel regression were not violated, we used the Influence.Me package for R (Nieuwehuis and Te Grotenhuis 2009) to test for outliers within a multilevel setting, and perturbations to test for collinearity and ill-conditioned data within a multilevel setting. These tests showed that our results are robust. We used the RealCom macro for MlWin (Goldstein et al. 2009) to (multiple) impute missing values on perceived relative income within our multilevel setting.

  4. 4.

    This effect is mediated by national wealth; high social trusting countries are also wealthier (model not displayed).

  5. 5.

    A positive effect of income inequality on subjective well-being in a large international sample is reported by Haller and Hadler (2006). However, they provide the reader with additional explanations for this positive effect. Among others, the unequal but happy Latin American countries are portrayed as exceptions. Because of these explanations, which they do not test simultaneously, Haller and Hadler conclude (later on) that inequality decreases well-being.

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Correspondence to Gerbert Kraaykamp.

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Rözer, J., Kraaykamp, G. Income Inequality and Subjective Well-being: A Cross-National Study on the Conditional Effects of Individual and National Characteristics. Soc Indic Res 113, 1009–1023 (2013). https://doi.org/10.1007/s11205-012-0124-7

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Keywords

  • Subjective well-being
  • Income inequality
  • Cross-level interactions
  • World Value Survey
  • European Value Survey