I have come across this brilliant summary of the book The Inner Level in The Economist.

The authors suggest that social inequality causes stress and anxiety, which results in mental illnesses such as narcissism, psychosis and schizophrenia. They explain for example that 10% of Japanese and German people suffer from mental illnesses, against 20% of Britons and Australians and 25% of Americans, and that this correlates with inequality levels.

More interestingly, they claim that social inequality affects all levels of society, not just the poorest. They say that in the most unequal societies the richest 10% are more socially anxious than all but the bottom 10% in low-inequality countries. This is in part due to status anxiety, i.e. stress related to fears about individuals’ places in social hierarchies, but also to increased crime, drug abuse and insecurity in the unequal societies.

They conclude that "the ideal, perhaps, is a world in which strong communities help individuals to thrive—a Nordic model, producing high incomes, low inequality and rosy levels of well-being". That would explain indeed why Nordic countries are the happiest in the world.

You can read the article here: The Economist: Does inequality cause suicide, drug abuse and mental illness?