Article ID Journal Published Year Pages File Type
5047030 Social Science Research 2017 23 Pages PDF
Abstract

•Does societal income inequality harm individuals' quality of life, their subjective well-being?•No. In developing nations inequality increases well-being by 8 points out of 100.•In advanced nations it has no effect.•Data from 169 surveys, 68 nations, over 200,000 cases; multi-level models with many controls.•Flaws in prior research: Aggregate data, no split between developing and advanced, no GDP control.

Income inequality has been contentious for millennia, a source of political conflict for centuries, and is now widely feared as a pernicious “side effect” of economic progress. But equality is only a means to an end and so must be evaluated by its consequences. The fundamental question is: What effect does a country's level of income inequality have on its citizens' quality of life, their subjective well-being? We show that in developing nations inequality is certainly not harmful but probably beneficial, increasing well-being by about 8 points out of 100. This may well be Kuznets's inverted “U”: In the earliest stages of development some are able to move out of the (poorly paying) subsistence economy into the (better paying) modern economy; their higher pay increases their well-being while simultaneously increasing inequality. In advanced nations, income inequality on average neither helps nor harms. Estimates are from random-intercept fixed-effects multi-level models, confirmed by over four dozen sensitivity tests. Data are from the pooled World Values/European Values Surveys, Waves 1 to 5 with 169 representative national samples in 68 nations, 1981 to 2009, and over 200,000 respondents, replicated and extended in the European Quality of Life Surveys.

Related Topics
Social Sciences and Humanities Psychology Social Psychology
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