Age-Specific Income Inequality and Happiness Over the Life Cycle

Abstract

One of the main puzzles uncovered by the happiness literature is the U-shaped relationship between age and self-declared happiness, with a mid-life nadir, around 50-55. In this paper, we show that mid-life is also the moment when within-age income inequality is at its most. We also show that greater within-age income inequality comes with lower life satisfaction. Moreover, this negative impact is stronger for those whose income is below the median level in their age-group. Hence, relative income concerns seem to be a factor of the trough in the agehappiness curve.

Keywords: Life satisfaction, life cycle, age-specific income inequality