Household debt and happiness: evidence from the China Household Finance Survey

ABSTRACT

Using the China Household Finance Survey Data, this article studies the effect of household debt on happiness. The empirical results based on the ordered logit model show that (1) total household debt will significantly reduce family’s happiness; (2) the effect of different types of debt on happiness is heterogeneous, and housing debt and education debt are the main sources of this negative effect, while other types of debt have no significant effect; (3) the different sources of housing debt have different effects on happiness, and only nonbank housing debt significantly reduces people’s happiness; and (4) risk attitude plays an important role in the relationship between debt and happiness, where families with a high degree of risk aversion have lower happiness when borrowing money.

KEYWORDS:

• Household finance
• household debt
• housing debt
• happiness
• risk attitude

JEL CLASSIFICATION:

• D10
• H31
• R20

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Instead of dummy variable, we conducted two main robustness checks by defining debt variable as continuous variable, i.e., the amount of household debt and debt-to-asset ratio, where natural logarithmic forms are used, and the results are robust.

² The results from the ordered probit model also show the robustness.

Additional information

Funding

This research was supported by the National Natural Science Foundation of China (71861008, 71662009), the Natural Science Foundation of Hainan Province (718QN221), the Colleges and Universities Scientific Research Projects of the Education Department of Hainan Province (Hnky2016-7) and the Scientific Research Foundation of Hainan University (kyqd(sk)1809, kyqd1634).