The Income Inequality Hypothesis Revisited: Assessing the Hypothesis Using Four Methodological Approaches

The income inequality hypothesis states that income inequality has a negative effect on individual’s health, partially because it reduces social trust. This article aims to critically assess the income inequality hypothesis by comparing several analytical strategies, namely OLS regression, multilevel regression, fixed effects models and fixed effects models using pseudo panel data. To test the hypothesis, data from two studies conducted between 1981 and 2014 were combined: the World Values Survey and the European Values Study. Three frequently used measures of health were taken into account. In the OLS and multilevel models, income inequality was often associated with better health, whereas in the fixed effects and pseudo panel data, income inequality was associated with poorer health, suggesting that the unexpected results of the OLS and multilevel methods might be explained by unobserved confounders. Furthermore, in almost all of the models, social trust mediates the relationship between income inequality and health, showing the importance of this mechanism. Interestingly, the pseudo panel data offer the strongest support for the income inequality hypothesis, suggesting that better controlling for confounding factors and/or more carefully monitoring cohort effects, may result in a better understanding whether and how income inequality can be harmful for people’s health

Income inequality and subjective well-being: A cross-national study on the conditional effects of individual and national characteristics

Contains fulltext : 116539.pdf (publisher's version ) (Closed access)In this study we raise the question how a nation’s income inequality affects subjective well-being. Using information on 195,091 individuals from 85 different countries from the World Value Surveys and the European Value Surveys, we established that in general, people living in more unequal countries report higher well-being than people from more equal countries. This association however does not apply to all people similarly. First, the positive effect of a nation’s income inequality is weaker when individuals express more social and institutional trust, and underscore egalitarian norms to a larger extent. Second, the positive association between national income inequality and subjective well-being is less strong for people from countries with high levels of social and institutional trust. So, our research predominantly indicates that there are far-reaching effects of an individual’s and a nation’s trust on people’s well-being.15 p