Does a Rising Tide Lift All the Boats? Explaining the National Inequality of Happiness

Abstract

Many recent studies in economics have uncovered the economic and socio-economic factors that are most related to differences among nations in citizens' self-reported levels of well-being (SWB). However, these cross-country studies have generally not taken into account the fact that around the SWB national average, a considerable spread of scores exists within nations. In an extreme case, a country may be in the midst of a major social upheaval, with a large group of dispossessed and disadvantaged individuals, yet this fact is completely hidden by the arithmetical average. Using cross-country data with diverse economic and socio-economic characteristics and the latest available dataset on well-being, we uncover the factors that appear to be the most highly correlated with the inequality of well-being within nations. We find the inequalities in individual incomes and quality of health, and the level of institutional qualities to be most important in explaining the inequalities of well-being.