Abstract
The happiness literature empirically shows that individuals are happier not necessarily if they live in a country with high economic growth, but most important if they live in cohesive societies, with more equality (not only in terms of income), less poverty, higher social capital, and jobs for everybody. This chapter relates to this literature and examines the link between inequality and happiness or life satisfaction. Section “Inequality and Happiness” presents a literature review on the correlation between inequality and happiness. In the review, special attention is given to the mechanisms that explain preferences for equality. Although the income inequality literature has emphasized the distinction between objective inequality (e.g., measured with the Gini) and perceived inequality, the happiness literature has not considered this distinction. Nevertheless, one would expect individuals to show a stronger correlation between perceived, rather than with objective, inequality and well-being, preferences, and behavior. Section “Inequality and Happiness” briefly discusses this. Section “Happiness Inequality” describes first the incipient literature on happiness or life satisfaction inequality trends, which is mostly descriptive. While policy makers and researchers have focused on income (and, to a lesser extent, health) inequality, the distribution of happiness has been largely ignored. Nevertheless, happiness distribution is a relevant measure of welfare and should be on the agenda of policy makers. In this literature, happiness inequality is typically measured with the standard deviation, an inequality index thought for cardinal variables. A priory this is an important shortcoming as happiness is measured as an ordinal discrete variable. Therefore, it is of crucial importance to analyze the impact of measuring happiness inequality by means of indices designed for ordinal measures. This chapter contributes to the happiness literature by presenting the first empirical study that, using data on 56 countries, measures happiness inequality with 20 different indices designed for ordinal data and compares them with the standard deviation by means of rank correlations.
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Acknowledgments
Responsible Section Editor: Milena Nikolova. The chapter has benefitted from very valuable comments of the editor Milena Nikolova and two anonymous referees. Ada Ferrer-i-Carbonell gratefully acknowledges financial support by the Spanish Ministry of Economy and Competitiveness Grant through project grant ECO2017-88130-P and by the Generalitat de Catalunya through project grant SGR2017-1359. Xavier Ramos gratefully acknowledges financial support by the Spanish Ministry of Economy and Competitiveness Grant through project grant PID2019-104619RB-C43 and by the Generalitat de Catalunya through project grant SGR2017-1571. There is no conflict of interest.
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Ferrer-i-Carbonell, A., Ramos, X. (2021). Inequality and Happiness. In: Zimmermann, K.F. (eds) Handbook of Labor, Human Resources and Population Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-57365-6_185-1
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DOI: https://doi.org/10.1007/978-3-319-57365-6_185-1
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