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Inequality and Happiness

Working Paper 2007-75

Abstract

This paper examines the relationship between inequality and happiness through the lens of heterogeneous values, beliefs and inclinations. Drawing upon opinion data from the European Social Survey for twenty-three countries, we find that individual views on a wide range of themes can be effectively summarized by two orthogonal dimensions: moderation and inclusiveness. The former is defined as a tendency to take mild stands on issues rather than extreme ones; the latter is defined as the degree of support for a social model that grants equal rights and opportunities to everyone who willingly subscribes to a shared set of rules, regardless of background and circumstances. These traits matter when it comes to how inequality affects subjective well-being; specifically, those who are either more moderate or more inclusive than their average compatriot tend to dislike inequality. With reference to moderation, inequality aversion can be read in terms of a desire for stability: people who are reluctant to take strong stands probably dislike conflict, tension and unrest, which normally accompany inequalities. With reference to inclusiveness, the main element at play is likely to be distress accruing to a perception of unfairness.

Authors: Claudia Biancotti , Giovanni D’Alessio .

Keywords: Happiness, inequality, heterogeneity
JEL: D31, D63.