Income, inequality, and subjective well-being: an international and inter- temporal perspective using panel data

In this paper we present new quantitative results on the linkages between absolute income levels, relative incomes, income inequality, and attitudes towards redistribution in a large sample of countries over the past 30 years. While we find that absolute income levels have a significant but very small effect on well-being, we find that relative incomes matter much more. In addition, we find that preferences for inequality are a significant driver of well-being. Lastly, we observe that overall inequality has an additional negative impact on well-being in a country in all three country-groupings. Taken together, this suggests that inequality has a rather strong negative impact on well-being. In fact, depending on the context, reducing inequality can do more to promote subjective well-being than increasing economic growth.