The effect of consumption inequality on subjective well-being: Evidence from China.

Abstract

As an essential dimension of economic inequality, consumption inequality is tightly associated with public welfare. This study investigates the effect of consumption inequality on individuals' subjective well-being (SWB) in China using data from the 2014, 2018, and 2020 China Family Panel Studies. The findings indicate that consumption inequality has a significant negative impact on SWB. Specifically, for every unit increase in consumption inequality, the probability of individuals rating their SWB as "Happy" and "Very happy" decreases by 0.37% and 5.45% respectively. In addition, individuals' confidence about their future serves as an intermediary in the connection between consumption inequality and SWB. The investigation of heterogeneity evidences that the adverse impact of consumption inequality on SWB is more pronounced in terms of subsistence and development expenditures. Consumption inequality affects SWB more seriously among lower-income and urban residents. Overall, this study holds important implications for addressing economic inequality to bolster individuals' welfare.