Inequality and Happiness

There can be few more readily-accepted statements than "Income inequality is bad for well-being". We here first consider how well-being is measured, and then ask how it is related to the distribution of income. What may have appeared obvious is in fact not so. When individuals compare their incomes to each other, inequality changes not only absolute income but also income relative to others. In addition, our normative judgements of the "right" level of inequality vary widely according to the method applied to measure them, the part of the income distribution in which income changes, and whether income changes are fair. Reflecting the above concerns, empirical work on income inequality and happiness has produced a remarkable variety of contradictory findings.