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Exploring the Effects of Consumption Expenditures on Life Satisfaction in China

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Abstract

This study, using data from China Family Panel Studies, investigates how different types of consumption expenditures affect individuals’ life satisfaction in China. The results demonstrate that overall consumption expenditures and savings are positively associated with life satisfaction irrespective of whether income remains constant or not. When the components of consumption expenditures are scrutinized, increased spending on conspicuous goods augments life satisfaction while increased spending on basic goods diminishes it after controlling for confounding factors. Evidence of relationship heterogeneity across income groups is presented: conspicuous spending contributes to life satisfaction in low- and middle-income groups; however, increased basic consumption expenditures have a negative impact on the lowest and second lowest income groups, but no effect on higher income groups. This study contributes to the research on consumption and wellbeing in emerging markets with significant implications for marketing and policy.

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Data Availability

The data are from China Family Panel Studies (CFPS), funded by 985 Program of Peking University and carried out by the Institute of Social Science Survey (ISSS) of Peking University. See details of CFPS data from the official website http://www.isss.pku.edu.cn/cfps/en/about/introduction/index.htm.

Notes

  1. ‘Consumption upgrade’ denotes the evolution of China’s consumption mode, which has seen three major upgrades. The first occurred in the late 1970s when consumption expenditures on food began to drop, while demand for goods, such as bicycles, watches, and radios began to rise significantly. The second upgrade occurred between the late 1980s and mid 1990s and was characterized by huge demand for durable home appliances, especially color TVs, washing machines, and refrigerators. The third is happening currently and is characterized by burgeoning online sales and soaring demand for high-quality goods and services (China Global Television Network, 2019).

  2. According to Diener (2000), subjective wellbeing consists of four components: global life satisfaction, satisfaction with important life domains, positive affect and low levels of negative affect; however, overall life satisfaction is the most commonly used indicator of an individual’s self-assessment (OECD, 2013). As with previous literature (e.g., Easterlin, 2005; Johns and Ormerod, 2007; Rehdanz and Maddison, 2005; Wu, 2020), the terms “life satisfaction,” “happiness,” and “subjective wellbeing” are used interchangeably throughout this study. See Veenhoven (2000) for their specific meanings.

  3. https://www.numbeo.com/property-investment/rankings.jsp.

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Authors and Affiliations

  1. School of Accounting, Guangdong University of Foreign Studies, Guangzhou, 510006, China

    Qian Li

  2. School of Economics, Guangdong Ocean University, Zhanjiang, 524088, China

    Xiaoguang Huang

  3. School of Finance, Guangdong University of Foreign Studies, Guangzhou, 510006, China

    Hanwen Zhang

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Correspondence to Xiaoguang Huang.

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CFPS data used in this paper were downloaded from the CFPS official website. ISSS of Peking University in China who have carried out the survey is responsible for the informed consent from the respondents.

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Appendix

Appendix

See Tables 5, 6, 7, 8, 9, 10.

Table 5 Consumption categories
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Table 6 Robustness check
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Table 7 Results from the 2SLS regression
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Table 8 The effects of income, total consumption expenditures, and savings on life satisfaction-the results from the OLS regression with bootstrap standard errors
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Table 9 The effects of conspicuous and basic consumption expenditures on life satisfaction—the results from the OLS regression with bootstrap standard errors
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Table 10 Test for multicollinearity
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Li, Q., Huang, X. & Zhang, H. Exploring the Effects of Consumption Expenditures on Life Satisfaction in China. J Happiness Stud 24, 1963–1990 (2023). https://doi.org/10.1007/s10902-023-00665-z

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