Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71284
Authors: 
Bjørnskov, Christian
Dreher, Axel
Fischer, Justina A. V.
Schnellenbach, Jan
Gehring, Kai
Year of Publication: 
2013
Series/Report no.: 
Freiburger Diskussionspapiere zur Ordnungsökonomik 13/2
Abstract: 
We argue that perceived fairness of the income generation process affects the association between income inequality and subjective well-being, and that there are systematic differences in this regard between countries that are characterized by a high or, respectively, low level of actual fairness. Using a simple model of individual labor market participation under uncertainty, we predict that high levels of perceived fairness cause higher levels of individual welfare, and lower support for income redistribution. Income inequality is predicted to have a more favorable impact on subjective well-being for individuals with high fairness perceptions. This relationship is predicted to be stronger in societies that are characterized by low actual fairness. Using data on subjective well-being and a broad set of fairness measures from a pseudo micro-panel from the WVS over the 1990-2008 period, we find strong support for the negative (positive) association between fairness perceptions and the demand for more equal incomes (subjective well-being). We also find strong empirical support for the predicted differences in individual tolerance for income inequality, and the predicted influence of actual fairness.
Subjects: 
happiness
life satisfaction
subjective well-being
inequality
income distribution
redistribution
political ideology
justice
fairness
World Values Survey
JEL: 
I31
H40
D31
J62
Z13
Document Type: 
Working Paper

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