Income Inequality and Life Satisfaction: A Comparative Study of India and Sweden

Abstract

The pursuit of economic growth has traditionally been viewed as the main tool for the promotion of well-being of humans. Nonetheless, numerous decades of data have shown that when there is growth but no equal distribution, well-being does not improve for most individuals. This paper seeks to analyse the link between income inequality and well-being by conducting a comparative analysis of India and Sweden. There are various reasons why these two countries would be a good subject for analysis. India is a developing country that is experiencing rapid economic growth but with a significant level of structural inequality and an informal labour market. Based on information obtained from the World Happiness Report, the World Inequality Database, the World Values Survey, and World Bank Development Indicators, the article claims that the negative impacts of income inequality on life satisfaction occur through three different but connected mechanisms: relative deprivation because of social comparison, the deprivation of basic capabilities by virtue of lack of equal access to state organisations, and the deterioration of trust in the government and the state system. Notably, however, such outcomes are not predetermined. As illustrated by the example of Sweden, effective redistribution mechanisms, comprehensive social security, and good-quality public services can mitigate the impacts of income inequality. This paper is based on Amartya Sen's Capabilities Approach, the Easterlin paradox, and Richard Layard's political economy of happiness theory. These results can be applied to current issues regarding economics and development, governance and politics, and post-colonial views on inequality in the Global South.