Happiness and Inequality Aversion Worldwide

The paper tests the importance of income inequality in predicting life satisfaction using a sample of over 260,000 world citizens covering 84 countries between 1981 and 2004. We \u85nd that income inequality is not a good predictor of income inequality across world citizens. The cross-section evidence is that higher income inequality measured at the country or regional level is not consistently associated with lower or higher individual life satisfaction. The same can be said for the static cross-country analysis. Higher inequality in countries is not consistently associated with lower or higher average life satisfaction. However, a cross-country dynamic analysis shows that increases in income inequality over time are associated with decreases in average life satisfaction. This result is rather robust across di¤erent speci\u85cations of the life satisfaction equation and for ginis calculated on di¤erent samples. Moreover, we \u85nd that, at any point in time, subjective inequality aversion is not really driven by the level of income inequality but by other individual factors including political orientation, freedom of choice, education, trust, gender and values