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Fall 2020

ISSN 0890-913X

Volume 35, Number 3

Has Economic Growth Made Americans Better Off despite Rising Income Inequality? Evidence from Subjective Well-Being Data

Boris Nikolaev, Baylor University

Daniel L. Bennett, Baylor University

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TheJournalofPrivateEnterprise35(3),2020,63–92HasEconomicGrowthMadeAmericansBetterOffdespiteRisingIncomeInequality?EvidencefromSubjectiveWell-BeingDataBorisNikolaevBaylorUniversityDanielL.BennettBaylorUniversity_____________________________________________________AbstractAlargeportionoftherealincomegainsfromUSeconomicgrowthsincethe1970shasaccruedtothetopincomequartile.Weevaluatetheequalityefficiencytrade-offusingsubjectivewell-beingdatafromtheGeneralSocialSurvey.Specifically,weestimatetheparameterofinequalityaversionwithinaneoutilitarianframeworkofwelfareanalysisandcalculatetheAtkinsonInequalityIndex.Wethenusethisinformationtoevaluatesocialwelfareovertheperiod1974–2012.Theanalysissuggeststhateconomicgrowthhasbeensufficienttoraisesocialwelfaredespitetherisinglevelofincomeinequality,butAmericanshavebecomemoreinequalityaverseovertime._____________________________________________________JELCodes:D63,I31,O15,O51Keywords:happiness,incomeinequality,inequalityaversion,economicgrowth,socialwelfare,subjectivewell-beingI.IntroductionRecentstudiesinhappinesseconomicssuggestthatcreatingamoreegalitariansociety(Alesina,DiTella,andMacCulloch2004;GrahamandFelton2006)1andincreasingtheabsolutelevelofpersonalincome(FreyandStutzer2002;KahnemanandDeaton2010)maypromoteahappiersociety.Yet,asOkun(1975)pointsout,economicgrowthandincomeequalitymaybemutuallyexclusivepublicpolicyobjectives(seealsoVedderandGallaway1999).WhilepercapitaGDPgrewbynearly2percentperyearfrom1970through2010,incomeinequalityalsogenerallyincreasedoverthisperiod.Figure1showstheevolutionoftopincomesharesintheUnitedStatesfrom1970to2010.Theshareofnationalincomeconcentratedinthetop11Theliteratureontherelationshipbetweeninequalityandhappinesshasproducedmixedfindings(e.g.,Snowdon2012).

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Title	Has Economic Growth Made Americans Better Off despite Rising Income Inequality? Evidence from Subjective Well-Being Data
Authors/Creators:	Boris Nikolaev, Baylor University Daniel L. Bennett, Baylor University
Year:	2020
Volume:	35
Number:	3
Pages:	63 - 92
Publisher:	The Association of Private Enterprise Education
ISSN:	0890-913X
Document Type:	Articles
Keywords:	happiness, income inequality, inequality aversion, economic growth, social welfare, subjective well-being

Citation:
Nikolaev, Boris; Bennett, Daniel L. / 2020. "Has Economic Growth Made Americans Better Off despite Rising Income Inequality? Evidence from Subjective Well-Being Data." The Journal of Private Enterprise, 35(3): 63-92.