Becoming Richer Hasn't Made China Much Happier

Despite their per capita income being nearly 20 times what it was in the late '80's, the Chinese have experienced a decline in life satisfaction.

China's growth model has not been completely "happy," according to the Oxford Companion to the Economics of China ,write Shenggen Fan of the IFPRI, Ravi Kanbur of Cornell University, Shang-Jin Wei of Columbia University and Xiaobo Zhang of Peking University.

They believe there are four reasons for this:

1. The relative wealth effect:

As income increases, people's aspiration primes to a new target. Relative deprivation is a widespread phenomenon. For example, when seeing neighbors suddenly getting rich, one may feel relatively deprived and less happy even though his own income does not change at all."

2. While the Chinese economy has done well overall, there is a large rural-urban gap in income:

"The large rural-urban gap in income and access to public service has been a defining feature of the contemporary Chinese economy, generating a major source of resentment for rural residents. Although during the reform period, health indicators have improved, their rural-urban gap has widened."

3. The higher education gap between rural and urban populations has widened:

"Thanks to the nine-year mandatory education law introduced in 1986, illiteracy rate has largely been eliminated in both rural and urban areas (Li, entry in this volume). However, the access to higher education has widened. In the late 1970s, most of the college students came from rural areas. However, the share of rural student dropped to only 10% in elite universities in recent years. There is an emerging trend that many rich families send their children abroad for college, even high school education. The number of studying abroad has increased at an annual rate of 25% in the past decade. Of course, the share of studying abroad among rural families was much lower than their urban counterparts."

4. The state of the environment hasn't helped:

"Some undesirable outcomes of growth negatively affect people's life satisfaction. Environment problems and food safety are now among the top concerns of urban residents. The heavy smog in Beijing in early 2013 highlighted the seriousness of the problem. The pollution index in Beijing exceeded the safety threshold for 19 days out of 31 days (Washington Post, 2013). Two Chinese cities command the top spots in the lists of the world's ten most polluted places. Air pollution has become a national problem."

Read the entire paper at NBER »