IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v81y2012i1p159-171.html
   My bibliography  Save this article

Are optimistic expectations keeping the Chinese happy?

Author

Listed:
  • Frijters, Paul
  • Liu, Amy Y.C.
  • Meng, Xin

Abstract

In this paper we study the effect of optimistic income expectations on life satisfaction amongst the Chinese population. Using a large scale household survey conducted in 2002 we find that the level of optimism about the future is particularly strong in the countryside and amongst rural-to-urban migrants. The importance of these expectations for life satisfaction is particularly pronounced in the urban areas, though also highly significant for the rural area. If expectations were to reverse from positive to negative, we calculate that this would have doubled the proportion of unhappy people and reduced proportion of very happy people by 48 per cent. We perform several robustness checks to see if the results are driven by variations in precautionary savings or reverse causality.

Suggested Citation

  • Frijters, Paul & Liu, Amy Y.C. & Meng, Xin, 2012. "Are optimistic expectations keeping the Chinese happy?," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 159-171.
  • Handle: RePEc:eee:jeborg:v:81:y:2012:i:1:p:159-171
    DOI: 10.1016/j.jebo.2011.09.007
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268111002356
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.jebo.2011.09.007?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Andries De Grip & Maarten Lindeboom & Raymond Montizaan, 2012. "Shattered Dreams: The Effects of Changing the Pension System Late in the Game," Economic Journal, Royal Economic Society, vol. 122(559), pages 1-25, March.
    2. Das, Marcel & van Soest, Arthur, 1999. "A panel data model for subjective information on household income growth," Journal of Economic Behavior & Organization, Elsevier, vol. 40(4), pages 409-426, December.
    3. Markus K. Brunnermeier & Jonathan A. Parker, 2005. "Optimal Expectations," American Economic Review, American Economic Association, vol. 95(4), pages 1092-1118, September.
    4. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
    5. N. Gregory Mankiw & Ricardo Reis & Justin Wolfers, 2004. "Disagreement about Inflation Expectations," NBER Chapters, in: NBER Macroeconomics Annual 2003, Volume 18, pages 209-270, National Bureau of Economic Research, Inc.
    6. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-484, July.
    7. Stutzer, Alois, 2004. "The role of income aspirations in individual happiness," Journal of Economic Behavior & Organization, Elsevier, vol. 54(1), pages 89-109, May.
    8. Claudia Senik, 2002. "When Information Dominates Comparison: A Panel Data Analysis Using Russian Subjective Data," William Davidson Institute Working Papers Series 495, William Davidson Institute at the University of Michigan.
    9. Senik, Claudia, 2008. "Is man doomed to progress?," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 140-152, October.
    10. Michael Hagerty, 2003. "Was Life Better in the “Good Old Days”? Intertemporal Judgments of Life Satisfaction," Journal of Happiness Studies, Springer, vol. 4(2), pages 115-139, June.
    11. Appleton, Simon & Song, Lina, 2008. "Life Satisfaction in Urban China: Components and Determinants," World Development, Elsevier, vol. 36(11), pages 2325-2340, November.
    12. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    13. Meng,Xin, 2009. "Labour Market Reform in China," Cambridge Books, Cambridge University Press, number 9780521121118.
    14. Souleles, Nicholas S, 2004. "Expectations, Heterogeneous Forecast Errors, and Consumption: Micro Evidence from the Michigan Consumer Sentiment Surveys," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(1), pages 39-72, February.
    15. Daniel S. Hamermesh, 2004. "Subjective Outcomes in Economics," Southern Economic Journal, John Wiley & Sons, vol. 71(1), pages 1-11, July.
    16. John Knight & Ramani Gunatilaka, 2008. "Aspirations, Adaptation and Subjective Well-Being of Rural-Urban Migrants in China," Economics Series Working Papers 381, University of Oxford, Department of Economics.
    17. Das, J.W.M. & Dominitz, J. & van Soest, A.H.O., 1997. "Comparing Predictions and Outcomes : Theory and Application to Income Changes," Other publications TiSEM 6eef11dd-0ae4-4673-b8c0-2, Tilburg University, School of Economics and Management.
    18. Dwayne Benjamin & Loren Brandt & John Giles, 2011. "Did Higher Inequality Impede Growth in Rural China?," Economic Journal, Royal Economic Society, vol. 121(557), pages 1281-1309, December.
    19. John Knight & Ramani Gunatilaka, 2010. "The Rural-Urban Divide in China: Income but Not Happiness?," Journal of Development Studies, Taylor & Francis Journals, vol. 46(3), pages 506-534.
    20. Knight, John & Gunatilaka, Ramani, 2010. "Great Expectations? The Subjective Well-being of Rural-Urban Migrants in China," World Development, Elsevier, vol. 38(1), pages 113-124, January.
    21. Matthew Rabin, 1998. "Psychology and Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 11-46, March.
    22. Daniel S. Hamermesh, 2004. "Subjective Outcomes in Economics," Southern Economic Journal, John Wiley & Sons, vol. 71(1), pages 2-11, July.
    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. Guriev, Sergei & Zhuravskaya, Ekaterina & Frijters, Paul & Liuy, Amy Y.C. & Mengz, Xin, 2009. "Happiness in transition countries [2 articles]," CEPREMAP Working Papers (Docweb) 0902, CEPREMAP.
    2. Paul Frijters & Harry Greenwell & John P. Haisken‐DeNew & Michael A. Shields, 2009. "How well do individuals predict their future life satisfaction? Evidence from panel data following a nationwide exogenous shock," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(4), pages 1326-1346, November.
    3. Knight, John & Gunatilaka, Ramani, 2012. "Income, aspirations and the Hedonic Treadmill in a poor society," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 67-81.
    4. Senik, Claudia, 2009. "Direct evidence on income comparisons and their welfare effects," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 408-424, October.
    5. Tufan Ekici & Selda Koydemir, 2016. "Income Expectations and Happiness: Evidence from British Panel Data," Applied Research in Quality of Life, Springer;International Society for Quality-of-Life Studies, vol. 11(2), pages 539-552, June.
    6. Alois Stutzer & Bruno S. Frey, 2008. "Stress that Doesn't Pay: The Commuting Paradox," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(2), pages 339-366, June.
    7. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2006. "Income and happiness: Evidence, explanations and economic implications," PSE Working Papers halshs-00590436, HAL.
    8. Akay, Alpaslan & Bargain, Olivier & Zimmermann, Klaus F., 2012. "Relative concerns of rural-to-urban migrants in China," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 421-441.
    9. Qianping Ren & Maoliang Ye, 2017. "Donations Make People Happier: Evidence from the Wenchuan Earthquake," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 132(1), pages 517-536, May.
    10. Marta Barazzetta, 2015. "The asymmetric effect of expectations on subjective well-being," Working Papers 374, ECINEQ, Society for the Study of Economic Inequality.
    11. Emma Pleeging & Martijn Burger & Job Exel, 2021. "Hope Mediates the Relation between Income and Subjective Well-Being," Journal of Happiness Studies, Springer, vol. 22(5), pages 2075-2102, June.
    12. Wang-Sheng Lee & Zhong Zhao, 2017. "Height, Weight and Well-Being for Rural, Urban and Migrant Workers in China," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 132(1), pages 117-136, May.
    13. Liu, Zhiqiang & Shang, Qingyan, 2012. "Individual well-being in urban China: The role of income expectations," China Economic Review, Elsevier, vol. 23(4), pages 833-849.
    14. Efstratia Arampatzi & Martijn Burger & Spyridon Stavropoulos & Louis Tay, 2020. "The Role of Positive Expectations for Resilience to Adverse Events: Subjective Well-Being Before, During and After the Greek Bailout Referendum," Journal of Happiness Studies, Springer, vol. 21(3), pages 965-995, March.
    15. Marco Bertoni & Luca Corazzini, 2015. "Life Satisfaction and Endogenous Aspirations," SOEPpapers on Multidisciplinary Panel Data Research 761, DIW Berlin, The German Socio-Economic Panel (SOEP).
    16. Chang Wen-Chun, 2008. "Toward Independence or Unification?," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 13(2), pages 1-32, January.
    17. Andrew E. Clark & Claudia Senik, 2010. "Will GDP growth increase happiness in developing countries?," PSE Working Papers halshs-00564985, HAL.
    18. Akay, Alpaslan & Bargain, Olivier B. & Giulietti, Corrado & Robalino, Juan D. & Zimmermann, Klaus F., 2016. "Remittances and relative concerns in rural China," China Economic Review, Elsevier, vol. 37(C), pages 191-207.
    19. Bruno S. Frey & Matthias Benz, 2004. "From Imperialism to Inspiration: A Survey of Economics and Psychology," Chapters, in: John B. Davis & Alain Marciano & Jochen Runde (ed.), The Elgar Companion To Economics and Philosophy, chapter 4, Edward Elgar Publishing.
    20. Vinod Mishra & Ingrid Nielsen & Russell Smyth, 2014. "How Does Relative Income and Variations in Short-Run Wellbeing Affect Wellbeing in the Long Run? Empirical Evidence From China’s Korean Minority," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 115(1), pages 67-91, January.

    More about this item

    Keywords

    Expectations; Happiness; Consumption and savings; China; Political economy;
    All these keywords.

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

    Statistics

    Access and download statistics

    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:eee:jeborg:v:81:y:2012:i:1:p:159-171. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.elsevier.com/locate/jebo .

    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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.