The China puzzle: falling happiness in a rising economy

Over the 1990-2000 decade happiness in China plummeted despite massive improvement in material living standards. This finding contradicts the notion that income growth at low living standards leads to gains, not losses, in happiness. We explain this puzzle by drawing on a specific version of relative deprivation theory, the concept of "frustrated achievers." Our major finding is that income inequality in China became increasingly skewed towards the upper income strata, so that related to the average income the financial position of most Chinese worsened. Consequently, financial dissatisfaction rose and became an increasingly important factor in depressing happiness. Other negative feelings emerging with rapid transitions, such as anomie and disaffection, show a less depressive effect on Chinese happiness. We conclude with some speculations about the applicability of our findings to transition economies in general.