Housing wealth and happiness in Urban China

Abstract

China has experienced rapid growth in inequality in housing wealth. We examine how housing wealth and housing wealth inequality are associated with happiness, drawing on panel data from three waves of the China Household Finance Survey (CHFS). We find that housing wealth and housing wealth inequality matter for happiness. More housing wealth increases happiness with diminishing returns to owning a second and third house. The relationship between housing wealth inequality and happiness depends on the reference group and the level of housing wealth inequality. An increase in housing wealth inequality among individuals of the same gender and similar age and education who live in the same city as me provides a signal that I also could accumulate housing wealth and this prospect makes me happier up to a threshold. However, once housing wealth inequality passes that threshold, this lowers my happiness because the wealth of those toward the top of the distribution seems out of reach. Similarly, a general increase in housing wealth inequality across the province in which I live lowers my happiness, which is consistent with a jealousy or status effect. We also employ the concentration index (CI) to examine the effect of housing wealth inequality on happiness inequality. The wealth-related CIs for happiness are all positive, suggesting that higher happiness is more concentrated among people with higher housing wealth.