| Abstract: |
There are conflicting theories about whether individuals like or dislike
inequality, or in other words, whether living in an unequal country increases
or decreases their subjective well-being. The empirical literature has also
not yet reached a consensus. In this paper, we add a new perspective to the
inequality-happiness puzzle. First, we study not only income inequality, but
also wealth inequality, which has so far been overlooked in the happiness
literature. Second, we reach beyond the usually studied Gini coefficient and
top income shares, looking also at the other parts of income or wealth
distribution. Using data from the integrated World Values Surveys and European
Values Surveys for over 50 countries, matched with World Inequality Database
data over the years 1981-2020, we find that individuals are happier with
increases in the top 10% and top 1% shares of wealth and less happy with
increases in the middle 40% share of either wealth or pre-tax income.
Increasing the bottom 50% share of after-tax income also makes individuals
happier, suggesting that they favor income redistribution. We offer possible
explanations for these findings. |