Inequality and Social Rank: Income Increases Buy More Life Satisfaction in More Equal Countries

How do income and income inequality combine to influence subjective well-being? We examined the relation between income and life satisfaction in different societies, and found large effects of income inequality within a society on the relationship between individuals’ incomes and their life satisfaction. The income—satisfaction gradient is steeper in countries with more equal income distributions, such that the positive effect of a 10% increase in income on life satisfaction is more than twice as large in a country with low income inequality as it is in a country with high income inequality. These findings are predicted by an income rank hypothesis according to which life satisfaction is derived from social rank. A fixed increment in income confers a greater increment in social position in a more equal society. Income inequality may influence people’s preferences, such that people’s life satisfaction is determined more strongly by their income in unequal societies.

Recommended citation: Quispe-Torreblanca, E., Brown, G., Boyce, C., Wood, A., & De Neve, J. (forthcoming). “Inequality, Well-being, and Social Rank: Income Increases Buy More Life Satisfaction in More Equal Countries”. Personality and Social Psychology Bulletin.