Question

Draw the well-being curve. Show on the curve how redistribution from rich to poor affects well-being and utility (4 points)

Answer 1

Education Institutions, governments, and international institutions are growingly using personalised well-being metrics as tools for analysis and as supportive gauges of economic and social progress. They issue new tools for informing policy design and estimating policy outcomes. Measures of life gratification, happiness, reported mental illness, and/or daily moods and experiences—ranging from happiness to stress and anger—can help us understand a range of behaviors, as well as their welfare profits or costs, across individuals, countries, and generations.
Among these associations, the one between age and happiness—often referred to as “the U-curve”—is especially striking due to its regularity across individuals, countries, and cultures.
Many studies agree that income inequality, rather than absolute income, is main predictor of happiness. However, its specific role has been questionable. We argue that income inequality and happiness should exhibit an inverted U-shaped relationship due to the dynamic competing process . If income inequality level rises beyond a critical point, the jealousy effect will become the imposing factor, in which individuals tend to be unhappy because they are disillusioned about the prospect of upward mobility and jealous of their wealthier peers. This hypothesis is examined in a longitudinal dataset on the United States and a cross-national dataset on many European countries. In both datasets, the Gini coefficient (a common index of a society’s income inequality) and its quadratic term were proper indicators of personal happines. These findings drop new light on our understanding of the relationship between income inequality and personal happiness.