Partial Effect of Absolute Income and Comparison Income on Happiness in China and Indonesia

Date of Award


Document Type


Degree Name

Bachelor of Arts



First Advisor

Monica Das


How would people’s individual-level absolute income affect their own subjective well being or happiness level? Would the average income of people’s reference group also have significant influence on people’s happiness? This paper is going to examine both the effect of absolute income and the effect of comparison income on people’s happiness level, in the context of China and Indonesia. The Chinese dataset comes from Chinese Household Income Project conducted in 2002, and the Indonesian dataset comes from Indonesian Family Life Survey conducted between 2014 and 2015. The result of this paper suggests that there exists a reverse U-shaped relationship between the Chinese individual’s absolute income level and individual happiness level, and there exists a quadratic relationship between Indonesian individual’s absolute income level and individual happiness level. In terms of the effect of comparison income, both Chinese individuals and Indonesian individuals’ comparison incomes have a negative linear relationship with these individuals’ happiness level. The reverse U-shaped relationship between Chinese individual’s absolute income and happiness has never been suggested by any other literatures examining the similar topic.

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