The Effect of Income Inequality in a Country on Personal Life Satisfaction

In this paper we study the eects of income inequality, as measured by the Gini index, on personal subjective well-being. There is some evidence in the literature that inequality has adverse eects on people in the economically advanced countries and but is not a major concern for people in the developing world. We nd support for this theory using a mixed factor approach on the aggregated sample of 82,020 people from 61 countries in the World Values Survey over the period from 2005 till 2014. Additionally we check whether the eect of inequality is dierent for particular groups of people based on their income. We nd that the negative consequences of inequality in the developed countries are more pronounced for the rich. Found coecients are robust to adding social trust or importance of democratic values, but lose signicance if nancial satisfaction is controlled for. Possible explanations for such results are suggested.