The Puzzle of Falling Happiness despite Rising Income in Rural China: Eleven Hypotheses

John Knight, Bianjing Ma and Ramani Gunatilaka

Economic Development and Cultural Change, 2022, vol. 70, issue 3, 1103 - 1131

Abstract: With economic development can come social and cultural change, for good or ill or both. We pose an unexplored question: why has happiness fallen in rural China whereas rural income has risen rapidly? Two rich data sets are analyzed. Our main methods are happiness regressions and decomposition methodology. Several approaches are adopted, and no fewer than 11 hypotheses are tested. One approach is to examine the variables that are found to be important in happiness functions and to consider their contributions to the fall in the mean happiness score of rural people. Four variables stand out and together can explain three times over the fall in happiness: reduced sensitivity of happiness to income, increased sensitivity of happiness to relative income position in the village, a sharper U shape of happiness in response to aging, and relative changes in the returns to education. Another approach is to analyze the effect on rural happiness of the vast rural-urban migration that took place over this period, in particular, the effect of temporary migration on information flows to the village, thus broadening reference groups and changing attitudes, and its effect on the lives of those left behind in unbalanced households. This is followed by tests of the role that changing attitudes—toward sense of community, degree of materialism, and aspirations for income—might have played. The analysis is illuminating both substantively and methodologically, but a puzzle remains. A general conclusion is that the effects of development-driven social change on happiness, both directly and indirectly through changing attitudes, are good candidates for further research.

Date: 2022
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