Perceived Air Pollution，Income and Happiness

Abstract

The American economist Easterlin put forward the famous Easterlin Paradox” in a study on happiness in 1974. It is said that higher income is not systematically accompanied by greater happiness. In other words, in the early stages of economic growth, people’s happiness will increase significantly with the increase of income level; after the income growth reaches a certain level, people’s happiness may decrease with the increase of income level. Since then, many studies have explained this phenomenon from the perspective of relative income and missing variables. In the past, most countries’ development experiences have shown that sacrificing the environment in exchange for economic growth is more common in many regions. Therefore, many scholars use the environmental quality as an important factor in the theory of missing variables to explain the Easterlin Paradox”.Unlike most previous studies, this paper distinguishes air pollution from measured air pollution and perceived air pollution. Perceived air pollution is an individual’s subjective assessment of atmospheric environment. Under the same environment, different individuals may have different sensitivity to air pollution. Psychology research shows that the direct impact on people’s happiness is the subjective feeling of air pollution, that is, perceived air pollution. Based on the perspective of environmental pollution sensitivity, this paper uses the 2016 China Labor Dynamics Survey data from Sun Yat-sen University to explore the impact of income on residents’ perceived air pollution, and further analyzes the heterogeneity of residents’ perceived air pollution on happiness, providing a new possible explanation for the Easterlin Paradox”.It comes to the following conclusions: First, the sensitivity to the environmental pollution of residents at different income levels is different. High-income people are more sensitive to air pollution. Second, the higher the income level of residents, the greater the negative impact of environmental pollution on residents’ happiness. It is found through calculations that high-income people will offer higher willingness-to-pay to improve air quality, while low-income people or residents in poverty levels are even willing to sacrifice the environment in exchange for income growth.The conclusion of this paper reminds us that in the process of environmental pollution control, it should be recognized that the environmental requirements of different groups are different. It is available to improve environmental quality and increase the income of the poor at the same time if the ecological compensation mechanism between developed regions and backward regions can be rational designed, so as to realize the Pareto improvement of the welfare of the whole society.The main contributions of this paper are: （1）making a further research on happiness; （2）analyzing the subjective feelings of different income groups on air pollution and their impact on happiness, and providing a new interpretation of the Easterlin Paradox” from the perspective of perceived air pollution; （3）effectively avoiding sample selective bias and making the results more reliable by using more comprehensive and nationally representative city-level air quality data.