The purpose of this study is to examine the relationship between government size and happiness inequality in a number of developing and developed countries during the period of 2002-2015 by Threshold Panel approach. To obtain robust results, we have applied the model in the Iran’ s economy by time series data during the period of 1974-2016. The results in developing countries showed that in small governments, the government size had a diminutive effect on the inequality of happiness, but by passing the Threshold and increasing the government's involvement in the economy, this variable had no significant effect on the happiness inequality. The same time series results were obtained for Iran’ s economy, which has a small government size. In this group, the government size has a significant negative impact on happiness inequality and after that, it has a significant positive impact on happiness inequality. Developed countries showed completely different results, whereby the size of the government had a significant positive impact on inequality in small governments but in large governments, it did not have a significant effect on the inequality of happiness.