Happiness Inequality: How Much is Reasonable?

We compute the Gini indexes for income, happiness and various simulated utility levels. Due to decreasing marginal utility of income, happiness inequality should be lower than income inequality. We find that happiness inequality is about half that of income inequality. To compute the utility levels we need to assume values for a key parameter that can be interpreted as a measure of relative risk aversion. If this coefficient is above one, as many economists believe, then a large part of happiness inequality is not related to pecuniary dimensions of life.