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Equality and income dispersion

Income equality can be assessed by calculating the ratio of average incomes of the richest 20% and the poorest 20%. This ratio is 26.1 for Brazil, followed by Botswana and Costa Rica; the most equal countries are Hungary (3.0), Poland (3.6), Japan (4.3) and Sweden (4.6) (Argyle, 1994). Equality has a quite strong correlation with subjective well-being; Diener et al. (1995) found this to be .48, Veenhoven and Ehrhardt (1995) found it .64. However, if income is held constant, the effect of income dispersion is much smaller or vanishes, because rich countries are also more egalitarian. In some studies the relationship was reversed, so that more unequal countries were happier. Diener and Oishi (in press) suggest this may be because eastern European countries are egalitarian, but unhappy for other reasons, while South American countries are unequal and happy, also for other reasons. However, within countries there is more variation in satisfaction when incomes are more unequal (Veenhoven, 1993).