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Income, Aspirations and the Hedonic Treadmill in a Poor Society

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  • John Knight
  • Ramani Gunatilaka

Abstract

A specially designed household survey for rural China is used to analyse the determinants of aspirations for income, proxied by reported minimum income need, and the determinants of subjective well-being, both satisfaction with life and satisfaction with income.� It is found that aspiration income is a positive function of actual income and reference income, and that subjective well-being is raised by actual income but lowered by aspiration income.� These findings suggests the existence of a partial hedonic treadmill, and can help to explain why subjective well-being in China appears not to have risen despite rapid economic growth.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 468.

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Date of creation: 01 Dec 2009
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Handle: RePEc:oxf:wpaper:468

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Keywords: Adaptation; Aspirations; China; Easterlin Paradox; Happiness; Hedonic treadmill; Subjective well-being;

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  1. Brandt, Loren & Holz, Carsten A, 2006. "Spatial Price Differences in China: Estimates and Implications," Economic Development and Cultural Change, University of Chicago Press, vol. 55(1), pages 43-86, October.
  2. Geeta Kingdon & John Knight, 2003. "Well-being poverty versus income poverty and capabilities poverty?," Economics Series Working Papers WPS/2003-16, University of Oxford, Department of Economics.
  3. Easterlin, Richard A. & Sawangfa, Onnicha, 2009. "Happiness and Economic Growth: Does the Cross Section Predict Time Trends? Evidence from Developing Countries," IZA Discussion Papers 4000, Institute for the Study of Labor (IZA).
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  5. Clark, Andrew E., 1999. "Are wages habit-forming? evidence from micro data," Journal of Economic Behavior & Organization, Elsevier, vol. 39(2), pages 179-200, June.
  6. Bruno S. Frey & Alois Stutzer, 2001. "What Can Economists Learn from Happiness Research?," CESifo Working Paper Series 503, CESifo Group Munich.
  7. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
  8. Alois Stutzer, . "The Role of Income Aspirations in Individual Happiness," IEW - Working Papers 124, Institute for Empirical Research in Economics - University of Zurich.
  9. Knight, Frank H., 1922. "Ethics and the Economic Interpretation," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 36, pages 454-481, May.
  10. Easterlin, Richard A., 2005. "A puzzle for adaptive theory," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 513-521, April.
  11. van de Stadt, Huib & Kapteyn, Arie & van de Geer, Sara, 1985. "The Relativity of Utility: Evidence from Panel Data," The Review of Economics and Statistics, MIT Press, vol. 67(2), pages 179-87, May.
  12. Matthew Rabin, 1998. "Psychology and Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 11-46, March.
  13. 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, 07.
  14. Kahneman, Daniel & Wakker, Peter P & Sarin, Rakesh, 1997. "Back to Bentham? Explorations of Experienced Utility," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 375-405, May.
  15. Hirschman, Albert O., 1973. "The changing tolerance for income inequality in the course of economic development," World Development, Elsevier, vol. 1(12), pages 29-36, December.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. How Happy Are You? What You Want Vs What You Have
    by Miguel in Simoleon Sense on 2010-03-31 16:24:20
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Cited by:
  1. Wenshu Gao & Russell Smyth, 2009. "Job Satisfaction And Relative Income In Economic Transition: Status Or Signal? The Case Of Urban China," Development Research Unit Working Paper Series 12-09, Monash University, Department of Economics.
  2. Stutzer, Alois & Frey, Bruno S., 2012. "Recent Developments in the Economics of Happiness: A Selective Overview," IZA Discussion Papers 7078, Institute for the Study of Labor (IZA).
  3. Ravallion, Martin, 2012. "Poor, or just feeling poor ? on using subjective data in measuring poverty," Policy Research Working Paper Series 5968, The World Bank.
  4. Andrew E. Clark & Claudia Senik, 2010. "Will GDP growth increase happiness in developing countries?," Working Papers halshs-00564985, HAL.
  5. James Alm & Yongzheng Liu, 2013. "China's Tax-for-Fee Reform and Village Inequality," Working Papers 1304, Tulane University, Department of Economics.
  6. John Knight, 2012. "The Economic Causes and Consequences of Social Instability in China," Economics Series Working Papers 619, University of Oxford, Department of Economics.
  7. Walter Hyll & Lutz Schneider, 2012. "The Causal Effect of Watching TV on Material Aspirations: Evidence from the “Valley of the Innocent”," IWH Discussion Papers 8, Halle Institute for Economic Research.

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