| Abstract: |
Using survey data from the China Family Panel Studies (CFPS) from 2010 to
2018, this paper analyzes the relationship between income inequality,
group-specific income redistribution, and subjective well-being among China’s
urban, rural, and migrant populations. Using narrowly defined reference
groups, our findings suggest that within-group inequality does not
significantly impact Chinese people. By contrast, a larger income gap between
urban and rural residents is positively correlated with the rural residents’
subjective well-being, which we interpret as a tunnel effect, i.e. a positive
signal concerning their own future income. Compared to migrants, however, our
results hint at a negative status effect for the rural residents. More
importantly, the group-specific redistribution inherent in the Hukou system
that widens the income gap between urban and rural residents makes rural
residents worse off. The existing Hukou system thus fails to lend support to
the ‘harmonious society’ development strategy of the Chinese government. |