A new paper by Vladimir Popov, Research Director in Economics and Political Sciences at the Dialogue of Civilizations Research Institute (DOC), challenges conventional wisdom regarding the relationships between income inequality, wealth inequality and happiness – and draws some counterintuitive conclusions that hold implications for policymakers grappling with issues of redistribution and social and economic fairness in low-income countries in particular.
The paper uses databases from the Forbes billionaires list, the Global Wealth Report (GWR), and the World Happiness Report, as well as from the World Database on Happiness, to examine the relationship between income inequality and happiness for over 200 countries from 2000 to 2018.
Professor Popov concludes that there are two “typical” statistical portraits of a happy country. One – the “Scandinavian model” – is a high-income country with low income inequality but relatively high wealth inequality and billionaire concentration. The other – the Latin American or African model – is a lower-income country but with higher levels of income and wealth inequality, especially at the top of the wealth pyramid
“Normally we assume that greater equality – ‘inclusive development that leaves no one behind’ – is both morally just and desirable for the creation of happy societies. But there is evidence that income inequalities are positively associated with happiness, as measured by the happiness index, at least for a group of countries,” the paper says.
Wealth inequalities (unlike income inequalities) seem to contribute to happiness in both poor and rich countries alike. The reason may be that wealth inequalities are an accumulated product of the past, whereas income inequalities are associated with the present – people are more likely to tolerate past rather than present injustices.
Concludes Professor Popov: “It may well be that a certain degree of inequality is necessary to keep alive a kind of ‘American dream’: a future- oriented belief in getting rich and achieving success in life.”
He also notes that there are different types of inequalities: “inequality at the very top does not seem to lead to pressure for redistribution.” An increase in inequality at the very top may be more acceptable than an increase in income differentiation among the middle class. A country where 99% of people are having roughly the same – equal – income, whereas 1% are multimillionaires, may be happier than a country where inequality is distributed more evenly.
The full paper can be downloaded from the DOC’s website here
Vladimir Popov is a Principal Researcher in the Central Economics and Mathematics Institute of the Russian Academy of Sciences. He is also a professor emeritus at the New Economic School in Moscow, and an adjunct research professor at the Institute of European and Russian Studies at Carleton University in Ottawa. He has published extensively on world economy and development issues, and his books and articles have been translated into dozens of languages. His full biography can be found on the DOC website here
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