More equal distribution of wealth makes people happier
Since the liberalization of the Western economies in the 1980s and 1990s, income inequality has increased dramatically. In the public debate, the question arises how this inequality impacts societies and what role it plays in the functioning of the economy. Bjorn Lous has studied this issue, based on the question: How do the various aspects of economic freedom relate to (inequality of) life satisfaction and trust through their relationship with income inequality? His most important conclusion is that when only few people profit from a high average income, this negatively affects the life satisfaction of societies as a whole. He will defend his PhD thesis on this subject at Tilburg University on Friday, January 31.
In his study, Lous defines happiness as that which makes a society successful. A society is successful if people are satisfied with their lives, are well off according to economic and health standards, and if they can trust each other. Trust tells something about how people live together and about mutual relations, which is important for stability and peaceful interaction in the long term.
Lous studied the institutional causes of income inequality and its effect on average life satisfaction in several countries. His focus was on economic freedom: the government protects individual property and provides a good legal system, but imposes as few rules and other restrictions as possible on companies and citizens. His research based on panel analysis shows that economic freedom generates a more unequal distribution of income, which makes societies as a whole unhappier.
His study also focused on the relationship between income inequality and life satisfaction inequality on the one hand and between life satisfaction inequality and mutual trust on the other. The panel analysis showed that both income inequality and life satisfaction inequality negatively impact trust. The effect of income inequality on trust, however, is three times as large as the effect of life satisfaction inequality on trust. Large income inequality thus leads to distrust across societies.
Lous’ research confirms the traditional philosophical approaches to inequality and challenges the standard 20th-century economic idea that income inequality is not relevant for stable, successful societies. Actively curbing income inequality can greatly benefit societies.
Bjorn Lous (1986) completed a Bachelor’s program of International Economics and Finance at Tilburg University, after which he continued his studies at Wageningen University with a Master’s in International Development Studies. He subsequently worked in Israel and Southern Sudan for some time, where he was involved in development projects. In 2014, he started his PhD research at Tilburg University. He also worked as a junior researcher for the Moral Markets Project.