Economic Inequality and Happiness

Abstract

The dislike that individuals have for inequality has recently been empirically tested by using self-reported measures of happiness as a proxy for utility. The few empirical existing studies have shown that inequality, usually measured as the GINI coefficient in the region or country where the individual lives, has a negative effect on self-reported happiness (notably Alesina, Di Tella and MacCulloch, 2004). In this project, we want to contribute to the literature by examining the reasons behind inequality aversion. First, we have already started to examine whether and to which extent the inequality aversion found is related to risk aversion. Although this theoretical hypothesis has been tested using experimental data this has can now be done with large panel data sets. Second, we will carefully examine the existence of different population groups for which inequality aversion may differ. In concrete, we will test whether more financially vulnerable individuals (e.g., low income, lower educated and women) show lower or higher inequality aversion than individuals with a more stable financial situation