Identity, Inequality, and Happiness: Evidence from Urban China

This paper presents the impact of income inequality on the subjective wellbeing of three different social groups in urban China. We classify urban social groups according to their hukou status: rural migrants, gborn h urban residents, and gacquired h urban residents who had changed their hukou identity from rural to urban. We focus on how the income disparity between migrants and urban residents affects individual happiness. The main results are as follows. People feel unhappy if inequality is related to their hukou identity, irrespective of whether they are urban residents with or without hukou. However, when identity-related inequality and other individual- and city-level characteristics are controlled, inequality measured by city-level Gini increases happiness. We also find that among urban residents who own hukou, mostly the gacquired h urban residents are unhappy with hukou-related inequality. This implies that identity is formed by both policy and personal experience. gBorn h urban residents have lower happiness scores when they are old. Communist Party members strongly dislike the identity-related inequality.