Discussion Paper

No. 2014-22 | May 22, 2014
Reduction of Income Inequality and Subjective Well-Being in Europe

Abstract

Using four waves of the European Social Survey (179,273 individuals from 29 countries) the authors analyze the association of reduction of income inequality (redistribution) with subjective wellbeing. Their results provide evidence that people in Europe are negatively affected by income inequality, whereas reduction of inequality has a positive effect on well-being. Since the authors simultaneously estimate the effects of income inequality and its reduction, their results indicate that not only the outcome (inequality), but also the procedure (redistribution) that leads to the outcome influences subjective well-being. The authors argue that living in a country where taxes and transfers reduce income inequality to a greater extent, the poor may feel more protected, and the rich may also feel more generous, which may result in an emotional benefit for them. It is also possible that well-being is associated not only with actual, but also with perceived inequality. The positive effect of redistribution seems to be stronger for less affluent members of the societies and left-wing oriented individuals. The estimations are different in Eastern and Western Europe: In post-communist countries people appear to be harder hit by inequality, whereas the impact of inequality reduction on well-being is higher in the East than in the West.

Data Set

Data sets for articles published in "Economics" are available at Dataverse. Please have a look at our repository.

The data set for this article can be found at: http://dx.doi.org/10.7910/DVN/26032

JEL Classification

D63 I31

Cite As

Tamás Hajdu and Gábor Hajdu (2014). Reduction of Income Inequality and Subjective Well-Being in Europe. Economics Discussion Papers, No 2014-22, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2014-22

Assessment



Comments and Questions


Tongam Sihol Nababan - Data and Result
May 23, 2014 - 12:22

Thank you for doing this research, it can expand my references in macroeconomics. But here, I give some suggestions :
In section of Data, the researchers should explained in detail why the research done in four waves.
In section of results, I suggest to add the population characteristics between ...[more]

... Eastern and Western Europe. It is important because the results of statistic analysis are different.


Tamás Hajdu - reply
May 27, 2014 - 13:37

Thank you for your comment.
We used the first four waves, because pre- and post-government income inequality data are not available for the very recent years.
Regarding the East-West differences we proposed some explanations in the paper. We think that the main causes might be the different cultural background or ...[more]

... the perceptions of opportunities. Unfortunately we do not have data on these factors.


Anonymous - Referee Report 1
June 26, 2014 - 08:26

see attached file


Anonymous - Referee Report 2
June 26, 2014 - 08:27

see attached file