IDEAS home Printed from https://ideas.repec.org/a/gam/jijerp/v15y2018i12p2667-d185874.html
   My bibliography  Save this article

Psychological Mechanisms Linking County-Level Income Inequality to Happiness in China

Author

Listed:
  • Jiaoli Cai

    (School of Economics and Management, Beijing Jiaotong University, No.3 Shangyuancun, Haidian District, Beijing 100044, China)

  • Li Zhang

    (School of Economics and Management, Beijing Jiaotong University, No.3 Shangyuancun, Haidian District, Beijing 100044, China)

  • Yulin Zhao

    (School of Economics, Wuhan University of Technology, 122 Luoshi Road, Wuhan 430070, China)

  • Peter C. Coyte

    (Institute of Health Policy, Management and Evaluation, University of Toronto, Health Sciences Building, 155 College Street, Suite 425, Toronto, ON M5T 3M6, Canada
    Canadian Centre for Health Economics, 155 College Street, Toronto, ON M5T 3M6, Canada)

Abstract

Background In China, income levels and living standards have improved significantly, but many Chinese citizens still do not feel any happier. This phenomenon may be attributed to increased income inequality. Methods Using data from the 2013 Chinese General Social Survey (CGSS), we employed multilevel structural equation modeling (MSEM) to investigate the impact of county-level income inequality on individual-level happiness in China and multilevel mediation analysis with structural equation modeling (MMSEM) to explore the mechanisms through which income inequality impacted happiness. Results A negative relationship between income inequality and happiness was found. The negative association between them was explained by two psychological mechanisms, i.e., fairness and trust. The findings explained a “Chinese puzzle,” i.e., why people do not feel happier despite improved income and living standards. Conclusions Our findings may provide a reference for policy makers to implement policies designed to improve individual happiness. What is important now is to reduce income inequality, and to potentially improve perceptions of fairness and trust in China.

Suggested Citation

  • Jiaoli Cai & Li Zhang & Yulin Zhao & Peter C. Coyte, 2018. "Psychological Mechanisms Linking County-Level Income Inequality to Happiness in China," IJERPH, MDPI, vol. 15(12), pages 1-32, November.
    • Handle: RePEc:gam:jijerp:v:15:y:2018:i:12:p:2667-:d:185874
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1660-4601/15/12/2667/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1660-4601/15/12/2667/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Paolo Verme, 2011. "Life Satisfaction And Income Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57(1), pages 111-127, March.
    2. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1251-1288.
    3. Jiang, Shiqing & Lu, Ming & Sato, Hiroshi, 2012. "Identity, Inequality, and Happiness: Evidence from Urban China," World Development, Elsevier, vol. 40(6), pages 1190-1200.
    4. repec:pri:cepsud:125krueger is not listed on IDEAS
    5. Christian Bjørnskov & Axel Dreher & Justina Fischer, 2007. "The bigger the better? Evidence of the effect of government size on life satisfaction around the world," Public Choice, Springer, vol. 130(3), pages 267-292, March.
    6. Nripesh Podder, 1996. "Relative Deprivation, Envy and Economic Inequality," Kyklos, Wiley Blackwell, vol. 49(3), pages 353-376, August.
    7. Alesina, Alberto & Di Tella, Rafael & MacCulloch, Robert, 2004. "Inequality and happiness: are Europeans and Americans different?," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2009-2042, August.
    8. Hung‐Lin Tao & Shih‐Yung Chiu, 2009. "The Effects of Relative Income and Absolute Income on Happiness," Review of Development Economics, Wiley Blackwell, vol. 13(1), pages 164-174, February.
    9. Tian-Cheng Li & Chien-Chi Chu & Fan-Cun Meng & Qin Li & Di Mo & Bin Li & Sang-Bing Tsai, 2018. "Will Happiness Improve the Psychological Integration of Migrant Workers?," IJERPH, MDPI, vol. 15(5), pages 1-22, May.
    10. Tomes, Nigel, 1986. "Income distribution, happiness and satisfaction: A direct test of the interdependent preferences model," Journal of Economic Psychology, Elsevier, vol. 7(4), pages 425-446, December.
    11. John Knight & Ramani Gunatilaka, 2011. "Does Economic Growth Raise Happiness in China?," Oxford Development Studies, Taylor & Francis Journals, vol. 39(1), pages 1-24.
    12. Ed Hopkins, 2008. "Inequality, happiness and relative concerns: What actually is their relationship?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 6(4), pages 351-372, December.
    13. Li, Hongbin & Meng, Lingsheng & Wang, Qian & Zhou, Li-An, 2008. "Political connections, financing and firm performance: Evidence from Chinese private firms," Journal of Development Economics, Elsevier, vol. 87(2), pages 283-299, October.
    14. Russell Smyth & Xiaolei Qian, 2008. "Inequality and Happiness in Urban China," Economics Bulletin, AccessEcon, vol. 4(24), pages 1-10.
    15. Chi, Wei, 2012. "Capital income and income inequality: Evidence from urban China," Journal of Comparative Economics, Elsevier, vol. 40(2), pages 228-239.
    16. Takashi Oshio & Kunio Urakawa, 2014. "The Association Between Perceived Income Inequality and Subjective Well-being: Evidence from a Social Survey in Japan," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 116(3), pages 755-770, May.
    17. Sjoerd Beugelsdijk & Henri L.F. de Groot & Anton B.T.M. van Schaik, 2004. "Trust and economic growth: a robustness analysis," Oxford Economic Papers, Oxford University Press, vol. 56(1), pages 118-134, January.
    18. Philip Oreopoulos, 2003. "Do Dropouts Drop Out Too Soon? Evidence from Changes in School-Leaving Laws," Working Papers oreo-03-01, University of Toronto, Department of Economics.
    19. Christian Bjørnskov, 2003. "The Happy Few: Cross–Country Evidence on Social Capital and Life Satisfaction," Kyklos, Wiley Blackwell, vol. 56(1), pages 3-16, February.
    20. Masanori Kuroki, 2011. "Does Social Trust Increase Individual Happiness In Japan?," The Japanese Economic Review, Japanese Economic Association, vol. 62(4), pages 444-459, December.
    21. Philip Oreopoulos, 2003. "Do Dropouts Drop Out Too Soon? International Evidence From Changes in School-Leaving Laws," NBER Working Papers 10155, National Bureau of Economic Research, Inc.
    22. Jan Ott, 2005. "Level and Inequality of Happiness in Nations: Does Greater Happiness of a Greater Number Imply Greater Inequality in Happiness?," Journal of Happiness Studies, Springer, vol. 6(4), pages 397-420, December.
    23. Gerdtham, Ulf-G & Johannesson, Magnus, 2001. "The relationship between happiness, health, and socio-economic factors: results based on Swedish microdata," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 30(6), pages 553-557.
    24. Kawachi, I. & Kennedy, B.P. & Lochner, K. & Prothrow-Stith, D., 1997. "Social capital, income inequality, and mortality," American Journal of Public Health, American Public Health Association, vol. 87(9), pages 1491-1498.
    25. Daniel Kahneman & Alan B. Krueger & David Schkade & Norbert Schwarz & Arthur A. Stone, 2006. "Would You Be Happier If You Were Richer? A Focusing Illusion," Working Papers 77, Princeton University, Department of Economics, Center for Economic Policy Studies..
    26. Hilke Brockmann & Jan Delhey & Christian Welzel & Hao Yuan, 2009. "The China Puzzle: Falling Happiness in a Rising Economy," Journal of Happiness Studies, Springer, vol. 10(4), pages 387-405, August.
    27. Peng Wang & Jay Pan & Zhehui Luo, 2015. "The Impact of Income Inequality on Individual Happiness: Evidence from China," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 121(2), pages 413-435, April.
    28. Podder, Nripesh, 1996. "Relative Deprivation, Envy and Economic Inequality," Kyklos, Wiley Blackwell, vol. 49(3), pages 353-376.
    29. Takashi Oshio & Kayo Nozaki & Miki Kobayashi, 2011. "Relative Income and Happiness in Asia: Evidence from Nationwide Surveys in China, Japan, and Korea," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 104(3), pages 351-367, December.
    30. Rati Ram, 2010. "Social Capital and Happiness: Additional Cross-Country Evidence," Journal of Happiness Studies, Springer, vol. 11(4), pages 409-418, August.
    31. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, July.
    32. Daniel Kahneman & Alan B. Krueger & David Schkade & Norbert Schwarz & Arthur A. Stone, 2006. "Would You Be Happier If You Were Richer? A Focusing Illusion," Working Papers 77, Princeton University, Department of Economics, Center for Economic Policy Studies..
    33. repec:ebl:ecbull:v:4:y:2008:i:24:p:1-10 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Asadullah, M. Niaz & Xiao, Saizi & Yeoh, Emile, 2018. "Subjective well-being in China, 2005–2010: The role of relative income, gender, and location," China Economic Review, Elsevier, vol. 48(C), pages 83-101.
    2. Tuyen Quang Tran & Cuong Viet Nguyen & Huong Vu, 2018. "Does Economic Inequality Affect the Quality of Life of Older People in Rural Vietnam?," Journal of Happiness Studies, Springer, vol. 19(3), pages 781-799, March.
    3. Quang Tran, Tuyen & Viet Nguyen, Cuong & Van Vu, Huong, 2015. "Economic Inequality and Happiness: A quantitative study among the elderly in Rural Vietnam," MPRA Paper 81235, University Library of Munich, Germany, revised 14 Oct 2016.
    4. Peng Wang & Jay Pan & Zhehui Luo, 2015. "The Impact of Income Inequality on Individual Happiness: Evidence from China," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 121(2), pages 413-435, April.
    5. Kaizhi Yu & Yun Zhang & Hong Zou & Chenchen Wang, 2019. "Absolute Income, Income Inequality and the Subjective Well-Being of Migrant Workers in China: Toward an Understanding of the Relationship and Its Psychological Mechanisms," IJERPH, MDPI, vol. 16(14), pages 1-27, July.
    6. Naoki Akaeda, 2020. "Contextual Social Trust and Well-Being Inequality: From the Perspectives of Education and Income," Journal of Happiness Studies, Springer, vol. 21(8), pages 2957-2979, December.
    7. Zhang, Quanda & Awaworyi Churchill, Sefa, 2020. "Income inequality and subjective wellbeing: Panel data evidence from China," China Economic Review, Elsevier, vol. 60(C).
    8. Quang Tran, Tuyen & Quy Nguyen, Thanh & Vu Van, Huong & Thanh Doan, Tinh, 2015. "Religiosity and life satisfaction among old people: Evidence from a transitional country," MPRA Paper 81360, University Library of Munich, Germany, revised 10 Jun 2015.
    9. Mikucka, Malgorzata & Sarracino, Francesco & Dubrow, Joshua K., 2017. "When Does Economic Growth Improve Life Satisfaction? Multilevel Analysis of the Roles of Social Trust and Income Inequality in 46 Countries, 1981–2012," World Development, Elsevier, vol. 93(C), pages 447-459.
    10. Iddisah Sulemana, 2015. "The Effect of Fear of Crime and Crime Victimization on Subjective Well-Being in Africa," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 121(3), pages 849-872, April.
    11. Clark, Andrew E. & D'Ambrosio, Conchita, 2014. "Attitudes to Income Inequality: Experimental and Survey Evidence," IZA Discussion Papers 8136, Institute of Labor Economics (IZA).
    12. Hania Wu & Tony Tam, 2015. "Economic Development and Socioeconomic Inequality of Well-Being: A Cross-Sectional Time-Series Analysis of Urban China, 2003–2011," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 124(2), pages 401-425, November.
    13. Haining Wang & Zhiming Cheng & Russell Smyth, 2015. "Does Consuming More Make You Happier? Evidence from Chinese Panel Data," Monash Economics Working Papers 29-15, Monash University, Department of Economics.
    14. Sarracino, Francesco & O'Connor, Kelsey J. & Ono, Hiroshi, 2019. "Making economic growth and well-being compatible: evidence from Japan," MPRA Paper 93010, University Library of Munich, Germany.
    15. Haiyang Lu & Peishan Tong & Rong Zhu, 2020. "Longitudinal Evidence on Social Trust and Happiness in China: Causal Effects and Mechanisms," Journal of Happiness Studies, Springer, vol. 21(5), pages 1841-1858, June.
    16. Di Tella, Rafael & Haisken-De New, John & MacCulloch, Robert, 2010. "Happiness adaptation to income and to status in an individual panel," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 834-852, December.
    17. Andrés Rodríguez-Pose & Viola Berlepsch, 2014. "Social Capital and Individual Happiness in Europe," Journal of Happiness Studies, Springer, vol. 15(2), pages 357-386, April.
    18. T. Lakshmanasamy & K. Maya, 2020. "The Effect of Income Inequality on Happiness Inequality in India: A Recentered Influence Function Regression Estimation and Life Satisfaction Inequality Decomposition," Indian Journal of Human Development, , vol. 14(2), pages 161-181, August.
    19. Jesper Rözer & Gerbert Kraaykamp, 2013. "Income Inequality and Subjective Well-being: A Cross-National Study on the Conditional Effects of Individual and National Characteristics," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 113(3), pages 1009-1023, September.
    20. Tuyen Quang Tran & Thanh Quy Nguyen & Huong Vu & Tinh Thanh Doan, 2017. "Religiosity and Subjective Well-Being Among Old People: Evidence from a Transitional Country," Applied Research in Quality of Life, Springer;International Society for Quality-of-Life Studies, vol. 12(4), pages 947-962, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jijerp:v:15:y:2018:i:12:p:2667-:d:185874. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.