A0473
Title: Country heterogeneity, happiness and income inequality
Authors: Shinn-Juh Lin - National Chengchi University (Taiwan) [presenting]
Abstract: National happiness level is related to income, income inequality and other crucial socioeconomic variables, such as happiness inequality, health condition, and social connection. In addition, countries may differ in many other aspects such as culture and regulations. To obtain an in-depth analysis of relations between happiness level and socioeconomic variables, data of the 1990s and the 2000s drawn from the World Database of Happiness are examined with two estimation approaches - pooled OLS and panel data analysis. The empirical results demonstrate that the role and the statistical significance of income inequality in explaining happiness clearly depends on unobservable country heterogeneity. Based on the pooled OLS, happiness and income inequality are positively related. However, after dividing all the countries into two groups, the relation between happiness and income inequality becomes insignificant for highly-developed countries, while that relation remains significantly positive for underdeveloped countries. Most interestingly, happiness turns out to be inversely related to income inequality with the panel data approach. These results favor the hypothesis that income inequality, instead of encouraging possibility of social mobility, entails more social comparison and hence reduces happiness level.
