It pays to be happy (if you are a man)

Abstract

Purpose – The purpose of this paper is to use cross-sectional data collected from six cities in China to examine the relationship between subjective wellbeing and male and female earnings and also to consider the contribution of differences in subjective wellbeing to explaining the gender wage gap. Design/methodology/approach – The paper uses survey data for 3,390 respondents working in a variety of blue collar and white collar jobs across a range of sectors including government, heavy and light manufacturing, mining and services in six Chinese cities: Chengdu, Dalian, Fushun, Fuxin, Fuzhou and Wuhan. The authors employ the ordinary least squares, Lewbel instrumental variable and Blinder-Oaxaca decomposition to econometrically analyze the relationship between subjective wellbeing and gender wage gap. Findings – The paper finds that the relationship between subjective wellbeing and wages is stronger for males than females. The authors note that 0.2 percent of the observed gender wage gap can be attributed to differences in mean subjective wellbeing in favor of females, while 53.5 percent can be ascribed to gender differences in returns to subjective wellbeing in favor of males. The paper also finds evidence that the relationship between subjective wellbeing and income is non-linear and that income peaks at higher levels of subjective wellbeing for men than women. Originality/value – The paper extends the existing literature in three important ways. First, the authors use a novel identification strategy, proposed by Lewbel (2012); second it uses a better measure for subjective wellbeing and third, it examine the role of differences in subjective wellbeing in explaining the gender wage gap.