Income rank more strongly predicts happiness in countries with larger income inequality
Study finds that the happiness gap between those at the top and bottom of the income ladder is larger in countries with greater income disparity than in those with a more equitable distribution of incomes.
A new study from academics at City, University of London and the University of Warwick used responses to the Gallup World Poll to analyse data from a sample of approximately 160,000 respondents in 24 countries around the world.
The researchers created a measure of income rank based on respondents’ self-reported annual household income. The income rank measure represents a ranking of income of respondents from the same reference group, i.e., people from the same country, region, age, gender and those who took the survey in the same year.
The study also includes respondents’ subjective well-being and a country’s level of income inequality. National income inequality was estimated from the World Inequality Database (WID) as the share of taxable income held by the top one per cent of income earners in that country.
In a first step, the researchers examined the association between income rank and respondents’ life evaluation (i.e., how satisfied people are with their life) and a battery of respondents’ feelings, such as positive affect (e.g., happiness), and negative affect (e.g., sadness). In a second step, the researchers explored the association between income rank and well-being, taking into account the country’s level of income inequality.
The study shows that respondents whose income ranked higher than those of their peers reported greater life evaluation and higher positive affect. However, the researchers did not find an association between income rank and negative affect.
The key finding is that the level of income inequality in a country shapes to what extent people’s income rank is related to their subjective well-being. Specifically, people who live in a more unequal country and whose income ranks higher in the income ranking of their reference group are more satisfied with their life than those who live in a more equal context.
The authors believe their findings point towards individuals having a greater incentive to pursue high income ranks in more unequal countries, shedding new light on the long-standing issue of why income inequality is much more persistent in some societies than others.
Two of the authors of the study, Dr Anke Plagnol, Senior Lecturer in Behavioural Economics, at City, University of London and Lucía Macchia, PhD candidate at City, said:
Our study suggests that people who earn more than their peers experience even higher well-being gains from their incomes when income inequality is high. This finding may help us understand why income inequality persists in many countries besides its well-known negative societal consequences.
The study is published in the journal Personality and Social Psychology Bulletin (PSPB).