The Effects of Income on Happiness in East and South Asia: Societal Values Matter?

Abstract

During the last two decades, economic studies on happiness have grown rapidly in particular, studies on the effect of income on happiness. Ng (Pac Econ Rev 7(1):51–63, 2002) has highlighted the East-Asian happiness gap. The East Asian countries, China, Hong Kong, Taiwan, Korea, Japan, Singapore, are performing well economically, however, performing poorly in happiness. Societal values have been suggested to be the potential explanation of this happiness gap. Nevertheless, the effects of societal values on happiness are yet to be explored fully. This paper aims to estimate the effect of income on happiness and examine the moderating effect of societal values in the context of the East-Asian happiness gap using the World Values Survey (WVS) data. The WVS (waves 6, 2010–2014) consists of nationally representative sample of 14,447 respondents from the various East and South Asian countries. It provides measurements of societal values, subjective well-being and other socio-demographic variables including income. We found that the effect of income on happiness is the lowest (and insignificant) in Thailand and Philippines; and the highest (and strongly significant) in South Korea and Taiwan. The effect of income becomes insignificant once it is moderated by the societal values. Societal values matter to explain the East-Asian happiness gap and might refute the relevance of Easterlin paradox.

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Fig. 1
Fig. 2
Fig. 3

Notes

  1. 1.

    Global Leadership and Organizational Behaviour Effectiveness (GLOBE) is a group of social scientists and management scholar which collected data to study cross-cultural leadership. It covers middle managers from different organizations across the various societies. See http://www.uvic.ca/gustavson/globe/index.php.

  2. 2.

    Some Asian societies are not available in WVS wave 6, such as Vietnam, Indonesia, Laos, Myanmar, Cambodia and Brunei.

  3. 3.

    The sample size of China and India appear low as compared to their population. However, the samples are national representative. As reported by WVS, the sampling design covers the whole areas of China and India. In China, the targeted population is all adults (age of 18–75) in all 31 provinces. It is stratified into the seven regions. The regions are further stratified by rural and urban. In India, the multiple level stratification sampling design is used: parliamentary area (all the 543 parliamentary areas), assembly area, location (polling booth), and respondent (EC list).

  4. 4.

    In the literature of the economics of happiness, life satisfaction and happiness are used interchangeably (see Easterlin 2001). Previous studies have found the either “happiness” or “life satisfaction”, it produces similar conclusions (Di Tella and MacCulloch 2008). Thus, the present paper uses the word “life satisfaction” and “happiness” interchangeably.

  5. 5.

    The sub-values are multi-point index (range from zero to one) which are constructed from items as in WVS. The relevant items are recoded into the same polarity (low scores represent weak values; high scores represent strong values). Then, the items are standardized into the same scale range (zero to one) and averaged to represent the sub-index (for details, see http://www.cambridge.org/cl/download_file/473755/).

  6. 6.

    Post-materialist represents the value orientations that emphasizing on autonomy and self-expression; whereas, materialist represents the values orientations that focusing on economic and physical security (Inglehard 2008).

  7. 7.

    The ordered logit model has the following assumptions: the values of dependent variable are ordinal and larger values are corresponded to higher level of happiness; the error terms are assumed to be logistically distributed; the observations are independent from each other; there is no perfect multicollinearity among the independent variables; a large sample size is needed. See Long (1997).

  8. 8.

    The latent value of happiness (y*) is the fitted values of the estimated Model 4 that based on the 10 deciles of income (X-axis, income) and three levels of societal values (0, 0.5, and 1, as represented by the three lines in the Fig. 3). Since the Model 4 is estimated based on the pooled data of the Asian countries, Fig. 3 shows how the societal values moderate the income-happiness relationship among these Asian countries.

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Acknowledgements

First of all, we would like to thank the financial support of the Taiwan Fellowship Program (Ministry of Foreign Affairs, Republic of China (Taiwan)). We also thank to the World Values Survey Association (WVS) for permission to use its data, the Institute of Economics, Academia Sinica (Taipei, Taiwan), Universiti Utara Malaysia (UUM, Malaysia) and the seminar participants whose comments have improved this paper substantially. Thank is also due to the anonymous referees whose comments have improved this paper substantially.

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Appendices

Appendix 1

See Table 9.

Table 9 The definition and measurement of variables

Appendix 2

See Table 10.

Table 10 Sample characteristics

Appendix 3

See Table 11.

Table 11 The estimated ordered logit models (odds ratio)

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Lim, H., Shaw, D., Liao, P. et al. The Effects of Income on Happiness in East and South Asia: Societal Values Matter?. J Happiness Stud 21, 391–415 (2020). https://doi.org/10.1007/s10902-019-00088-9

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Keywords

  • East-Asian happiness gap
  • Societal values
  • Income-happiness effect
  • Easterlin paradox

JEL Classification

  • A12
  • A13