Inequality

1
Inequality Happiness Are Europeans and
Americans Different?
Alberto Alesina Rafael Di Tella Robert
MacCulloch Harvard University Harvard Business
School London School of Economics
2
Happiness Economics

• goal is to determine from what sources people
  derive
• their well-being
• measures of happiness can then be used in
  formulating
• government policy on economic issues

Satisfaction with Life index Green
happiest Blue Pink Orange Red least happy
3
Determinants of happiness

• Micro happiness marital status, education,
  employment, income
• Macro happiness aggregate unemployment, size
  of welfare
• state, role of democratic institutions, role of
  social norms

• Why is happiness data valid?
• widely used by psychologists
• data has passed through validation
• exercises (i.e. physiological tests)

4
Income redistribution

• Share of total government
• spending over GDP
• Europe 44
• U.S.A. 30

• Democratic governments
• redistribute according to
• popular support

5
The Study

• Does income inequality affect individual
  happiness even
• after controlling for other factors? Why or why
  not?
• correlated 128,106 happiness responses to Gini
• coefficients for Europe and the U.S. over two
  decades
• evaluated sample across income and ideological
  lines

6
Survey questions

• U.S. General Social Survey (1972-1994)
• Taken all together, how would you say things are
  these dayswould you say that you are
• Very happy
• Pretty happy
• Not too happy

• Euro-Barometer Survey Series (1975-1992)
• On the whole, are you
• Very satisfied
• Fairly satisfied
• Not very satisfied
• Not at all satisfied
• with the life you lead?

7
Results

• Strong correlation between inequality and
  happiness in Europe,
• but not in the U.S.

• 10 increase in the
• Gini coefficient
• reduces the very
• happy category
• by 5.2 in Europe,
• 2.5 in the U.S.

8

• Happiness of the European poor and the European
  left is
• strongly affected by inequality
• Increase in one standard deviation of the Gini
  coefficient
• diminishes the very happy by 3.6 among the
  poor,
• and 4.7 among the left
• None of the U.S. groups (poor, rich, right, or
  left) experiences
• significant inequality generated unhappiness
• Only exception
• a sub-group of
• rich leftists

9
Analysis

• Europeans prefer more equality
• and social harmony
• Income equality is a
• luxury good
• Social mobility is (or is perceived
• to be) higher in the U.S.
• Present inequality has
• no bearing on future
• well-being

10
Questions

• Correlation
• Sources other than a European preference for
  equality and American social mobility may explain
  the findings

causality?