The relationship between subjective wellbeing and subjective wellbeing inequality: an important role for Skewness

We argue that the relationship between individual satisfaction with life (SWL) and SWL inequality is more complex than described by earlier research. Our measures of SWL inequality include indices designed specifically for ordinal data as well as often used (but inappropriate) measures suited to cardinal data. Using inequality indices derived by Cowell and Flachaire designed for use with ordinal data, our analysis shows that skewness of the SWL distribution, rather than inequality per se, matters for individual SWL outcomes. The empirical analysis is based on repeated cross-section data obtained from the World Values Survey. Our results are consistent with there being negative externalities for an individual’s SWL arising from people who are low in the SWL distribution, with positive externalities arising from people who are high in the SWL distribution.