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Individual well-being in urban China: The role of income expectations

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  • Liu, Zhiqiang
  • Shang, Qingyan

Abstract

Using household survey data, we study the determinants of individual well-being in urban China, emphasizing particularly the role of income expectations. First, we find that individual well-being increases contemporaneously with own income and decreases with community's average income, consistent with findings reported in previous studies. This result holds when we replace income with consumption and when we consider employment and health status of other family members. Second and more important, we find that income expectations have a positive and significant effect on individual well-being. This result is robust to alternative model specifications and to controls for optimistic personality. Instrumental variable estimates and endogeneity tests suggest that the positive relationship between well-being and income expectations is genuine. Our finding has the potential to explain why reported well-being has declined in China despite the spectacular economic growth in the past decades.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:chieco:v:23:y:2012:i:4:p:833-849
    DOI: 10.1016/j.chieco.2012.04.004
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    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.
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    4. Langchuan Peng, 2017. "Estimating Income-Dependent Relative Income Effects in the UK," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 133(2), pages 527-542, September.
    5. Sha Fan & Renuka Mahadevan, 2023. "Optimistic income expectations and meeting those expectations: What matters for well‐being in a developing country?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 70(2), pages 115-132, May.
    6. Longjin Chen & Jian Huang & Jianjun Li, 2017. "Fiscal Decentralization, Satisfaction with Social Services, and Inequality Under the Hukou System," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 132(1), pages 377-394, May.
    7. Sergei Guriev & Ekaterina Zhuravskaya, 2009. "(Un)happiness in Transition," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 143-168, Spring.
    8. Marcin Piekałkiewicz, 2017. "Why do economists study happiness?," The Economic and Labour Relations Review, , vol. 28(3), pages 361-377, September.
    9. repec:spo:wpmain:info:hdl:2441/7fst0pcf5j8cr99e1nuobt97rn is not listed on IDEAS
    10. Huaxing Liu & Hong Gao & Qing Huang, 2020. "Better Government, Happier Residents? Quality of Government and Life Satisfaction in China," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 147(3), pages 971-990, February.
    11. Dong Zhou & Langchuan Peng, 2018. "The Relationship Between the Gender Gap in Subjective Well-Being and Leisure Activities in China," Journal of Happiness Studies, Springer, vol. 19(7), pages 2139-2166, October.
    12. 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.
    13. Kumar, Pankaj & Kumar, Parveen & Garg, Ramesh Kumar, 2021. "A study on farmers' satisfaction and happiness after the land sale for urban expansion in India," Land Use Policy, Elsevier, vol. 109(C).

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    More about this item

    Keywords

    Happiness; Well-being; Income expectations; Transition economies;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • P25 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Urban, Rural, and Regional Economics

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