Income rank and life satisfaction: Examining the relationship with wealth inequality among middle-aged and older indian adults

Abstract

The relationship between income and subjective well-being (SWB) has intrigued scholars for decades. Richard Easterlin’s groundbreaking research in the 1970s revealed a paradox: while higher individual incomes within countries are associated with greater happiness, this trend does not hold across countries. This paradox highlights the significance of relative income over absolute income. Subsequent research has consistently demonstrated that relative income, or one’s income rank compared to others, has a more substantial impact on happiness than absolute income. Studies across various contexts have corroborated this finding, emphasizing the importance of social comparisons and status. This study investigates how wealth inequality moderates the association between income rank and life satisfaction in India. Utilizing data from the Longitudinal Ageing Survey of India (LASI), we examine how regional wealth inequality influences the relationship between income rank and well-being. Our analysis reveals that higher relative rank is associated with increased life satisfaction, while greater wealth inequality diminishes it. The interaction between income rank and wealth inequality is significant, indicating that relative income matters more in highly unequal regions. India’s vast economic growth and rising inequality make it a crucial case for understanding global inequality dynamics. Our findings suggest that in regions with higher wealth inequality, the association between relative rank on life satisfaction is magnified, highlighting the importance of social comparisons in well-being assessments. This research contributes to the broader discourse on income, inequality, and well-being, offering insights into a non-WEIRD (Western, Educated, Industrialized, Rich, and Democratic) context and emphasizing the relevance of relative rank in shaping life satisfaction.