Abstract
Whereas recent evidences suggest absolute inequalities (i.e. inequalities between agents’ income measured in absolute terms) and relative inequalities (i.e. inequalities captured by the ratio between agents’ income) to have different cognitive implications, econometric models consider both measures as interchangeable when referring to individual satisfaction. Do income inequalities measured both on relative and absolute terms lead to the same effect on individual satisfaction? We implement an experimental protocol so as to investigate the impact of income inequalities on individual satisfaction. By implementing different treatments, we disentangle the impact of absolute income inequalities from the impact of relative income inequalities on individual satisfaction. We observe that individual satisfaction is significantly and negatively correlated to absolute income inequalities. Relative inequalities seem to have no effect on individual satisfaction.
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Notes
The notions of absolute and relative differences mentioned in this paper contrast with the notions of absolute income (namely the absolute level of an agent's income) and of relative income (namely how one's income lies in the income distribution of a given reference group) often used in the happiness literature.
Ball and Chernova (2008) found opposite conclusions: relative income (defined as the agent's absolute income proportion relative to his or her country's median absolute income) exerts a significantly higher impact on subjective well-being than absolute income. This difference can be explained by the different definitions of relative income adopted by the authors.
On aggregate, 218 participants (109 pairs) have participated to our experiment but due to a technical incident the data of 33 participants have been lost. Then the paper is based on 175 participants.
Negative emotions such as anger or envy are known for arising quickly and being experienced intensively (Ben-Ze’ev 1994; Keltner and Lerner 2010; Kemper and Lazarus 1992). We conjecture that the time participants take for evaluating their satisfaction can capture the experience of negative emotions and can have an impact on participants’ satisfaction. In addition, it is acknowledged that negative emotions cause a drop in satisfaction levels (Smith and Kim 2007).
We thank an anonymous referee for highlighting that point.
Despite working efficiently with small sample size, Chin (1998) suggests to use at least 10 independent observations per predictor.
We thank an anonymous referee for pointing that issue.
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Acknowledgments
The author thanks Dimitri Dubois for programming the software and for his numerous advices. This paper benefited comments from Mélanie Heugues, Sylvain Max, Stéphane Mussard, and Marc Willinger. This paper benefited financial support from the regional council of the Reunion’s island and from the ANR-08-JCJC-0105-01 program “CONFLICT”.
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Celse, J. An Experimental Investigation of the Impact of Absolute and Relative Inequalities on Individual Satisfaction. J Happiness Stud 18, 939–958 (2017). https://doi.org/10.1007/s10902-016-9757-6
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DOI: https://doi.org/10.1007/s10902-016-9757-6