“Depression from Overestimation”: Income, Perception Bias and Children’s Mental Health in China’s Rural Households

The mental health of rural children is closely related to their household characteristics, with household income level as one of the important influencing factors. In general, improvement in household income level is deemed to play an important role in promoting children’s mental health. However, the impact and mechanism of household income status perception bias on children’s mental health due to changes in the structure of household expenditure are under studied. On the basis of the perspective of household income status perception bias, we constructed a representative behavior household model of income status perception bias and a three-wave panel. We adopted the data from Chinese household tracking surveys in 2012, 2014, and 2016 to empirically analyze the mechanism and channel of household income status perception bias on children’s mental health. Results reveal that: (1) A significant negative correlation exists between household income level and income status perception bias, and poor households are likely to have income status perception bias. (2) A significant positive correlation exists between income status perception bias of poor households and their gift-giving expenditure, whereas a negative correlation exists between income status perception bias and expenditure for children’s education. The more the poor households overestimate their income status, the more inclined they are to increase their gift spending and reduce expenditure for children’s education, thereby changing the structure of family expenditure. (3) A significant negative correlation exists between poor household income status perception bias and the mental health status of their children, whereas a positive correlation exists between household expenditure for children’s education and children’s mental health status. That is, the more that poor households overestimate their relative income status, the greater the mental pressure on children. Finally, the reduction of expenditure on children’s education by rural households is an effective channel through which income status perception bias among poor households affects children’s mental pressure.