Why is greater income inequality associated with lower life satisfaction and poorer health? Evidence from the European Quality of Life Survey, 2012

Greater income inequality is associated with lower average wellbeing. There are multiple possible explanations for this pattern. We use data from the European Quality of Life Survey 2012 (27,571 respondents from 28 countries) to evaluate the contributions of different causal pathways to associations between national income inequality and wellbeing. In unadjusted analyses, greater income inequality was associated with lower life satisfaction and poorer self-rated health. For life satisfaction, 43% of the association was attributable to individual income effects, and 41% to worse public services (especially access to healthcare). The association between income inequality and self-rated health was mainly (68%) due to individual income effects. For life satisfaction but not self-rated health, we found some evidence of costs of inequality that fall on those with high incomes. We conclude that the negative associations between income inequality and wellbeing across European countries are substantially, but not entirely, due to individual income effects.