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Are optimistic expectations keeping the Chinese happy?

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Listed:
  • Paul Frijters

    () (QUT)

  • Amy Y.C. Liu

    () (ANU)

  • Xin Meng

    () (ANU)

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%. We perform several robustness checks to see if the results are driven by variations in precautionary savings or reverse causality.

Suggested Citation

  • Paul Frijters & Amy Y.C. Liu & Xin Meng, 2008. "Are optimistic expectations keeping the Chinese happy?," NCER Working Paper Series 37, National Centre for Econometric Research.
  • Handle: RePEc:qut:auncer:2008-26
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    File URL: http://www.ncer.edu.au/papers/documents/NCER_WpNo37Nov08.pdf
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    Cited by:

    1. Frijters, Paul & Johnston, David W. & Shields, Michael A. & Sinha, Kompal, 2015. "A lifecycle perspective of stock market performance and wellbeing," Journal of Economic Behavior & Organization, Elsevier, vol. 112(C), pages 237-250.
    2. 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.
    3. 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.
    4. 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).
    5. Cai, Shu & Park, Albert, 2016. "Permanent income and subjective well-being," Journal of Economic Behavior & Organization, Elsevier, vol. 130(C), pages 298-319.
    6. 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.
    7. Zheng Fang & Chris Sakellariou, 2016. "Social Insurance, Income and Subjective Well-Being of Rural Migrants in China—An Application of Unconditional Quantile Regression," Journal of Happiness Studies, Springer, vol. 17(4), pages 1635-1657, August.
    8. repec:kap:reveho:v:16:y:2018:i:1:d:10.1007_s11150-017-9386-9 is not listed on IDEAS
    9. Marta Barazzetta, 2015. "The asymmetric effect of expectations on subjective well-being," Working Papers 374, ECINEQ, Society for the Study of Economic Inequality.
    10. Knight, John, 2013. "The economic causes and consequences of social instability in China," China Economic Review, Elsevier, vol. 25(C), pages 17-26.
    11. repec:spr:soinre:v:132:y:2017:i:1:d:10.1007_s11205-015-1126-z is not listed on IDEAS
    12. Foster, Gigi & Frijters, Paul & Johnston, David W., 2012. "The triumph of hope over disappointment: A note on the utility value of good health expectations," Journal of Economic Psychology, Elsevier, vol. 33(1), pages 206-214.
    13. Asena Caner, 2016. "Happiness and Life Satisfaction in Turkey in Recent Years," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 127(1), pages 361-399, May.
    14. Ying Liang & Peigang Wang, 2014. "Influence of Prudential Value on the Subjective Well-Being of Chinese Urban–Rural Residents," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 118(3), pages 1249-1267, September.
    15. John Knight, 2015. "The Principal-Agent Problem, Economic Growth, Subjective Wellbeing and Social Instability: China’s Effective but Flawed Governance," Economics Series Working Papers 758, University of Oxford, Department of Economics.
    16. Sarah Brown & Alexandros Kontonikas & Alberto Montagnoli & Mirko Moro & Luisanna Onnis, 2018. "Austerity, Life Satisfaction and Expectations," Working Papers 2018001, The University of Sheffield, Department of Economics.
    17. Asena Caner, 2015. "Happiness, Comparison Effects, and Expectations in Turkey," Journal of Happiness Studies, Springer, vol. 16(5), pages 1323-1345, October.

    More about this item

    Keywords

    Expectations; Happiness; Consumption and Savings; China; Political Economy;

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • P2 - Economic Systems - - Socialist Systems and Transition Economies

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