Income growth with high inequality implies loss of well-being: A mathematical model

TL;DR

This paper presents a mathematical model showing that increasing income inequality can lead to a decline in perceived well-being, especially among the most disadvantaged, despite overall income growth.

Contribution

It introduces a novel mathematical framework to quantify well-being perception considering income growth and inequality, highlighting the negative impact of high relative inequality.

Findings

High relative inequality reduces perceived well-being of the disadvantaged

Income growth alone does not guarantee improved well-being

Long-term welfare can decline under increasing inequality

Abstract

A mathematical model of measurement of the perception of well-being for groups with increasing incomes, but proportionally unequal is proposed. Assuming that welfare grows with own income and decreases with relative inequality (income of the other concerning one's own), possible scenarios for long-term behavior in welfare functions are concluded. Also, it is proved that a high relative inequality (parametric definition) always implies the loss of the self-perception of the well-being of the most disadvantaged group.