A national household survey for 2002, containing a specially designed module on
subjective well-being, is used to estimate pioneering happiness functions in rural China. The
variables predicted by economic theory to be important for happiness are relatively unimportant.
The analysis suggests that we need to draw on psychology and sociology if we are to understand.
Rural China is not a hotbed of dissatisfaction with life, possibly because most people are found
to confine their reference groups to the village. Relative income within the village and relative
income over time, both in the past and expected in the future, are shown to influence happiness.
‘Subjective well-being poverty’ functions are estimated, in which income and various proxies for
‘capabilities’ and ‘functionings’ appear as arguments. Even amidst the poverty of rural China,
social functionings, attitudes and expectations are important to subjective well-being.