Fairness and life satisfaction: a happy relationship?

Main motivation graph with distributionDaphne Nicolitsas, Department of Economics, University of Crete

The use of subjective well-being measures (SWB), notwithstanding their shortcomings, are increasingly being used to assess the welfare of societies. The ranking of countries on the basis of average SWB measures appears to closely follow that of country rankings on the basis of average per capital income. Some persistent cross-country differences, however, exist regarding the distribution of SWB measures within each country which cannot be attributed to income: most Danes appear to have a similar (high) level of life satisfaction while in Germany or France life satisfaction appears more evenly distributed across the population.

A potential explanation of this difference across countries is that in some countries (e.g. Denmark) individuals feel fairly treated and do not attribute the discrepancy of outcomes in their lives with expectations to unfair treatment. Using European Social Survey (ESS) information on how well individuals feel justice is being served in their countries and a measure of the gap between actual and expected wages we cannot reject this hypothesis.

Across country differences in average life satisfaction are a familiar feature of cross-country studies on subjective well-being. The satisfied Danes and the not so satisfied citizens of Eastern European countries are by now almost clichés. Differences in per capita income are part of the explanation.

Countries, however, differ in other aspects of life satisfaction besides the average score. Life satisfaction scores are pronouncedly negatively skewed in certain countries – in general countries with high average life satisfaction – but much more uniformly distributed in other countries.

Starting from Kahneman’s proposition that individuals assess their satisfaction with life by comparing outcomes with expectations the hypothesis put forward here is that in countries in which the distribution of life satisfaction scores is negatively skewed, individuals are less dissatisfied with outcomes. This is so because their expectations are more frequently met but also because, in the absence of the perception of generalized unfair treatment, the probability that they will be treated fairly is higher.

politicalinfluence

The European Social Survey (ESS) contains measures on individuals’ assessment of how well justice is being served. A snapshot of the data for one of these variables: the agreement or otherwise with the view that courts’ decisions are subject to political influence shows differences across countries which in a way match the distribution of life satisfaction measures in the population: the more disagreement there is with this view the more likely are the country’s citizens are similar to have a similar (and sizeable) level of life satisfaction and vice versa. This association also comes out in regression results and is also not contradicted when testing the association of life satisfaction with the gap between actual and expected remuneration: a significant relationship between this gap measure and life satisfaction is found for countries in which life satisfaction is more evenly distributed across the population.

References:
Kahneman, D. (1999), “Objective happiness” in Kahneman, D., E. Diener, N. Schwarz (eds.) Well-being: the foundations of hedonic psychology.  New York: Russell Sage Foundation.

Daphne Nicolitsas is an Assistant Professor of Applied Economics in the Department of Economics at the University of Crete. Prior to this, Daphne worked for a long time in policy-related jobs and in the financial sector. Daphne’s interests lie primarily in the area of labour economics and company performance.

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