Cross-national research with multilevel data: Is national income inequality good for all?

The well-known income inequality hypothesis implies that people in countries with a more equal income distribution show higher levels of well-being than people in unequal countries. To adequately test this hypothesis, it is first important that individual-level aspects such as income, education and social trust are adequately taken into account. This is relevant especially because people in equal countries are more likely to possess high levels of income, education and social trust, which may seriously influence the actual effect of income inequality. To deal with this methodological issue, it is preferred to use multilevel data that consists of information of various people across various countries. To constitute multilevel data, we employ the World Value Survey and the European Value Survey, and enrich it with contextual national-level information. Analyzing multilevel data with ordinary regression may result in the hypothesis on the national level being too easily accepted. It, therefore, is advisable to employ multilevel analyses. Results from our multilevel analysis indicate that (among the developed countries) national income inequality is not detrimental for people's well-being, and that people with higher income, education and social trust do report higher levels of well-being.