Inequality and happiness: Insights from Latin America

Inequality is a contentious topic in economics, and its effect on individual welfare remains an open question. We address this question from the perspective of a novel approach in economics – the study of happiness. In this discussion, we draw from our research on the topic, which is based on new empirical evidence from Latin America. We find several differences from studies conducted in the United States and Europe, especially regarding the role of perceptions of mobility and status. We find that inequality has negative effects on happiness in Latin America, where it seems to be a signal of persistent unfairness. Our research also examines the effects of several variables, including wealth, status, and reference group size, on the link between inequality and happiness, with the presumption that these variables can help us identify the channels through which inequality operates as a signaling mechanism. This article is based on a longer research paper [14], which is under review for publication.