Department of Economics and Business Economics

Inequality and Happiness: When Perceived Social Mobility and Economic Reality Do Not Match

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

  • Christian Bjørnskov
  • Axel Dreher, University of Heidelberg, Germany
  • Justina A.V. Fischer, University of Mannheim, Germany
  • Jan Schnellenbach, Walter Eucken Institut, Germany
  • Kai Gehring, University of Göttingen, Germany
We argue that perceived fairness of the income generation process affects the association between income inequality and subjective well-being, and that there are systematic differences in this regard between countries that are characterized by a high or, respectively, low level of actual fairness. Using a simple model of individual labor market participation under uncertainty, we predict that high levels of perceived fairness cause higher levels of individual
welfare, and lower support for income redistribution. Income inequality is predicted to have a more favorable impact on subjective well-being for individuals with high fairness perceptions. This relationship is predicted to be stronger in societies that are characterized by low actual fairness. Using data on subjective well-being and a broad set of fairness measures from a pseudo micro-panel from the WVS over the 1990–2008 period, we find strong support for the negative (positive) association between fairness perceptions and
the demand for more equal incomes (subjective well-being). We also find strong empirical support for the predicted differences in individual tolerance for income inequality, and the predicted influence of actual fairness.
Original languageEnglish
JournalJournal of Economic Behavior & Organization
Volume91
Pages (from-to)75-92
Number of pages18
ISSN0167-2681
DOIs
Publication statusPublished - 2013

See relations at Aarhus University Citationformats

ID: 52926962