The impact of happiness on income inequality: evidence from China

Abstract Using China Family Panel Studies 2010–2020 panel data to analyze the impact of happiness on income inequality, this paper finds that (1) individual happiness and working hours significantly contribute to income. (2) As the quantiles of individual income increase, the impact of happiness on income tends to expand and then shrink, and the positive effect of individual average weekly working hours on total annual income shows a significant downward trend. (3) The influence of happiness on residents’ income has a mediating effect on working hours, in which the direct effect of happiness on income is 0.0791, and the indirect effect of happiness on income via individual working hours is -0.0125. (4) The results of the Shapley decomposition method show that education level makes the greatest contribution to individual income differences, followed by gender, age, household status, occupation type, and average weekly working hours, and the contribution of individual happiness to the income gap is 0.53%.