Buying Happiness in an Unequal World: Rank of Income More Strongly Predicts Well-Being in More Unequal Countries

Does income rank matter more for well-being in more unequal countries? Using more than 160,000 observations from 24 countries worldwide, we replicate previous studies and show that the ranked position of an individual's income strongly predicts life evaluation and positive daily emotional experiences, whereas absolute and reference income generally have weak or no effects. Furthermore, we find the association between income rank and an individual's well-being to be significantly larger in countries where income inequality, represented by the share of taxable income held by the top 1% of income earners, is high. These results are robust to using an alternative measure of income inequality and different reference group specifications. Our findings suggest that people in more unequal societies place greater weight on the pursuit of higher income ranks, which may contribute to enduring income inequality in places where greater well-being can be bought from moving up the income ladder.