Societal income inequality and individual subjective well-being: Results from 68 societies and over 200,000 individuals, 1981–2008

Abstract

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.