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Do people care about income inequality and does income inequality affect subjective well-being? Welfare theories can predict either a positive or a negative impact of income inequality on subjective well-being and empirical research has found evidence on a positive, negative or non significant relation. This paper attempts to determine some of the possible causes of such empirical heterogeneity. Using a very large sample of world citizens, the author tests the consistency of income inequality in predicting life satisfaction. The analysis finds that income inequality has a negative and significant effect on life satisfaction. This result is robust to changes in regressors and estimation choices and also persists across different income groups and across different types of countries. However, this relation is easily obscured or reversed by multicollinearity generated by the use of country and year fixed effects. This is particularly true if the number of data points for inequality is small, which is a common feature of cross-country or longitudinal studies.

Comparator Countries --- Competitive Environment --- Economic Change --- Economic Theory & Research --- Income --- Inequality --- Poverty Impact Evaluation --- Poverty Monitoring & Analysis --- Public Sector Development --- Services & Transfers to Poor --- World Development Indicators

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The Middle East and North Africa region is known for having low female labor market participation rates as compared with its level of economic development. A possible explanation is that these countries find themselves at the turning point of the U-shape hypothesis when countries transition from declining to rising female participation rates. This paper tests the U-shape hypothesis in countries in the Middle East and North Africa. It finds that the region has outperformed other world regions in terms of the main drivers of the U-shape hypothesis, including gross domestic product per capita, economic transformation away from the agricultural sector, female education, and fertility rates. These facts are consistent with nonparametric evidence that shows countries in the region are distributed over a U-shaped curve. However, parametric tests of the hypothesis point in a different direction. The region shows an inverted U-shape overall and great heterogeneity across countries and age cohorts that defies any law on the relation between gross domestic product and female participation rate. The explanation behind these findings may be economic and cultural. Jobless growth and the lack of growth in employment sectors such as manufacturing and services, which proved critical for female employment in other countries, weaken labor demand and strengthen the role of institutions that may discourage female participation, such as marriage, legislation, and gender norms.

Economic Theory & Research --- Economic Transformation --- Female Education --- Fertility --- Health, Nutrition and Population --- Labor Market --- Labor Markets --- Labor Policies --- Macroeconomics and Economic Growth --- Participation Models --- Population Policies --- Social Protections and Labor

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The paper provides a review of the empirical literature in economics that has attempted to test the relative income hypothesis as put forward by Duesemberry (1949) and the relative deprivation hypothesis as formalized by Runciman (1966). It is argued that these two hypotheses and the empirical models used to test them are essentially similar and make use of the same relative income concept. The review covers the main intellectual contributions that led to the formulation and tests of these hypotheses, the main formulations of the utility and econometric equations used in empirical studies, the main econometric issues that complicate tests of the hypotheses, and the empirical results found in the literature. The majority of studies uses absolute and relative income together as explanatory factors in utility models and finds absolute income to have a positive and significant effect on utility (happiness). The majority of studies also finds relative income to be a significant factor in explaining utility but the sign of this relation varies across studies. The source of this variation is complex to detect given that few results are directly comparable across studies because of differences in model specifications.

Economic Theory & Research --- Inequality --- Labor Policies --- Literature Review --- Macroeconomics and Economic Growth --- Poverty Impact Evaluation --- Poverty Reduction --- Relative deprivation --- Relative income --- Rural Poverty Reduction

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This paper assesses the impact of social assistance benefits on household welfare in Moldova. Ignoring standard issues of impact evaluations such as selection bias, behavioral responses, unobserved heterogeneity and endogeneity, an incidence analysis suggests that increased spending on social assistance enhances the probability of moving out of poverty and reduces the probability of moving into poverty. However, double difference estimates (based on a mimicked randomized experiment) and parametric estimates (based on panel data) indicate that social benefits have not contributed to improve household welfare or reduce poverty. Double difference estimates point to a negative impact on welfare. Parametric estimates do not yield any consistent significant impact on welfare or poverty. The author concludes that the growth in population coverage and expenditure on cash benefits that characterized social assistance policies in recent years has not resulted in a significant improvement in welfare, all other factors being equal.

Cash benefits --- Financial crisis --- Household welfare --- Incidence analysis --- Living standards --- Poverty --- Poverty Reduction --- Poverty reduction --- Rural Development --- Rural Poverty Reduction --- Safety Nets and Transfers --- Services and Transfers to Poor --- Social assistance --- Social benefits --- Social Protections and Labor --- Unemployment

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Labor supply --- Recessions --- Labor supply.