Revisiting the relationship between income inequality and happiness | Malgorzata Mikucka

Abstract: While it is often thought that income inequality harms subjective well-being by exacerbating social disparities and weakening social ties, empirical support for this belief is surprisingly limited. Previous research on the topic has shown inconsistent results. Some studies have found that higher inequality correlates with reduced well-being (Hajdu & Hajdu, 2014; Oishi, Kesebir, & Diener, 2011; Schröder, 2018), whereas others suggested no significant link (Ngamaba, Panagioti, & Armitage, 2018) or even documented higher happiness in less equal countries (Rözer & Kraaykamp, 2013). These disparities may stem from methodological challenges like inadequate controls for unobserved heterogeneity between countries or limited geographical focus. Our study employs an extensive dataset from the Social Data Recycling (SDR) program, which harmonized post-hoc data from 23 international survey projects, 3,329 national surveys. This dataset's broad scope makes it uniquely suitable for analyzing the relationship between income inequality and subjective well-being. Our analysis includes all surveys recording life satisfaction on at least a 7-point scale, encompassing 75 countries, 404 country-years, and nearly 800,000 respondents. By employing multilevel regression, we distinguish the effects of changes in inequality within countries from differences between countries, thereby reducing biases from unobserved heterogeneity.

Our findings reveal a significant link between rises in within-country income inequality and decreases in subjective well-being. In contrast, differences in inequality between countries show either no effect or a positive correlation with subjective well-being, depending on model specification. The effect, however, is modest: a 10-point increase in the Gini coefficient corresponds to a 0.3 point drop in average life satisfaction. The variability in outcomes across different surveys highlights the need for broad data analysis and suggests considerable underlying heterogeneity in how income inequality affects well-being.


This event is an in-person extension of our Measuring Progress seminar series. Further details of the workshop are available on the website: https://statistiques.public.lu/en/sta...

Details of the seminar series are available on the website: https://statistiques.public.lu/en/sta...