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Contents Introduction

This paper examines recent trends and determinants of happiness inequality in Japan using unique data from the “Preference Parameters Study of Osaka University” that was conducted annually in Japan during the 2003-2013 period. The data illustrate that, despite some fluctuations, Japan observed a fall in happiness inequality along with income growth during this period. By estimating Recentered Influence Function regressions, we find a negative and significant relationship between income level and happiness inequality, as found for other countries. The results also show that people’s perception of their relative standing in the income spectrum matters for the level as well as the dispersion of happiness. Other key determinants of happiness inequality include the insecurity of jobs, unemployment, the fear of becoming unemployed in the near future, having health concerns, feeling a sense of loneliness, and the expected coverage of living costs by public pensions after retirement, all of which have a positive effect on happiness inequality except that the public pension variable negatively affects the dispersion of happiness. Our empirical analysis illustrates that happiness inequality is a useful addition to the set of conventional inequality indicators to monitor and better understand social inequality and to formulate measures to tackle inequality-related issues.