Working Papers

Inequality and Happiness: Evidence from the General Social Survey

This paper investigates the impact of the distribution of income on individuals’ happiness. I employ an ordered logistic regression model to estimate the effect of state-level pre-tax and post-tax income inequality on the happiness levels of respondents to the General Social Survey between 1981 and 2018. I find that both pre-tax and post-tax inequality have a negative relationship to happiness in the United States and that this result cannot be sufficiently explained by disaffection with the political or fiscal environment. I interact inequality with indicators for a series of financial, ideological, and philosophical characteristics of respondents to identify the factors driving inequality’s impact on happiness. Results show that decreases in happiness from inequality are not driven by political affiliation or relative income. Instead, I find parental marital status and family income during adolescence to be stronger predictors of the impact of inequality on happiness. I propose a possible explanation for this result: childhood conditions inform children’s beliefs about other people and expectations for future time periods. In adulthood, children who developed a positive outlook experience income inequality as friction between these expectations and reality. I utilize a logistic regression model to test this channel, finding that respondents who reported living with both parents during adolescence or growing up with an above average family income are more likely to report positive beliefs about the nature of other people and confidence in societal institutions. Furthermore, I find respondents who report these positive beliefs are more likely to report low levels of happiness in periods of high inequality.