State’s Role in Income Inequality: Social Preferences and Life Satisfaction

Abstract

This study analyzes the determinants of life satisfaction in two social identity profiles according to whether the individual favors or is against state intervention for reducing income inequality. The data originated from field research conducted in the Greek society during the years 2019, 2020, and 2022. Our findings suggest that individuals who are against state intervention to reduce income inequality are closer to the utilitarian view of life assessment. Their life satisfaction is shaped by happiness, the ability to borrow money, and the negative impact of social distrust. Alternatively, individuals favoring state intervention to reduce income inequality have a sophisticated background of traits, social values, and exogenous characteristics influencing their life satisfaction, such as happiness, religiosity, equitability, cultural change, the ability to borrow money, and state of health. Thus, microeconomic attitudes decisively establish macroeconomic policies through financial decisions and expectations about a resilient state’s obligations to its citizens. In this context, policy remarks suggest that state intervention promotes life satisfaction when it does not restrict individual freedom and well-being. The study’s novelty lies in providing a concise behavioral framework, without abandoning economic analysis, for the assessment of social preferences for economic organization and life satisfaction, which is at the center of efficient policymaking aimed to improve social welfare.