Psychological Mechanisms Linking County-Level Income Inequality to Happiness in China

Jiaoli Cai, Li Zhang, Yulin Zhao and Peter C. Coyte
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Jiaoli Cai: School of Economics and Management, Beijing Jiaotong University, No.3 Shangyuancun, Haidian District, Beijing 100044, China
Li Zhang: School of Economics and Management, Beijing Jiaotong University, No.3 Shangyuancun, Haidian District, Beijing 100044, China
Yulin Zhao: School of Economics, Wuhan University of Technology, 122 Luoshi Road, Wuhan 430070, China
Peter C. Coyte: Institute of Health Policy, Management and Evaluation, University of Toronto, Health Sciences Building, 155 College Street, Suite 425, Toronto, ON M5T 3M6, Canada

IJERPH, 2018, vol. 15, issue 12, 1-32

Abstract: Background In China, income levels and living standards have improved significantly, but many Chinese citizens still do not feel any happier. This phenomenon may be attributed to increased income inequality. Methods Using data from the 2013 Chinese General Social Survey (CGSS), we employed multilevel structural equation modeling (MSEM) to investigate the impact of county-level income inequality on individual-level happiness in China and multilevel mediation analysis with structural equation modeling (MMSEM) to explore the mechanisms through which income inequality impacted happiness. Results A negative relationship between income inequality and happiness was found. The negative association between them was explained by two psychological mechanisms, i.e., fairness and trust. The findings explained a “Chinese puzzle,” i.e., why people do not feel happier despite improved income and living standards. Conclusions Our findings may provide a reference for policy makers to implement policies designed to improve individual happiness. What is important now is to reduce income inequality, and to potentially improve perceptions of fairness and trust in China.

Keywords: happiness; income inequality; trust; fairness; China (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2018
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