The Welfare Effects of Social Mobility

The question whether a socially mobile society is conducive to subjective well-being (SWB) has rarely been investigated. This paper fills this gap by analyzing the SWB effects of intergenerational earnings mobility and equality in education at the societal level. Using socio-demographic information on 44’000 individuals in 30 OECD countries obtained from the World Values Survey, this study shows that living in a socially mobile society is conducive to individual life satisfaction. Differentiating between perceived and actual social mobility, we find that both exert rather independent effects, particularly in their interplay with income inequality. We identify a positive interaction of perceived social mobility that mitigates its overall SWB lowering effect, supporting Alesina et al. (2004). In contrast, a high degree of actual social mobility yields an overall impact of income inequality that is SWB lowering, while for low social mobility the effect of inequality is positive. These interactions hold stronger for pre-transfer than post-transfer income inequality. Actual social mobility appears to be appreciated only by conservative persons, while leftist oriented individuals are indifferent. Robustness using a world sample is tested.