Is happiness inequality immune to income inequality? New evidence through instrument-effect-corrected standard deviations

Previous research has found that a nation’s income inequality does not affect its happiness inequality. This article questions the appropriateness of the standard deviation as measure of happiness inequality used in these studies. Our main criticism concerns structural dependency, i.e. the technical dependency of the standard deviation on a nation’s mean happiness which is induced by measuring happiness with limited rating scales. To overcome this drawback, two new measures are proposed which adjust for the effects of limited instruments. Applying these new measures to the most recent World Values Survey data demonstrates that some countries change their ranking in the league table of happiness inequality considerably. Moreover, income inequality does affect corrected happiness inequality, a finding which has significant public policy implications.