Neighbourhood Cohesion and Subjective Well‐Being Among Disadvantaged Residents: Causal Evidence From the Public Housing Natural Experiment in Hong Kong

ABSTRACT Neighbourhood cohesion is suggested to improve residents' subjective well‐being, especially for disadvantaged individuals who are more likely to live in resource‐deprived neighbourhoods. However, existing studies face a challenge in establishing a causal relationship between neighbourhood cohesion and subjective well‐being due to endogeneity issues from residential selection. To address this methodological challenge, we use the random allocation of public housing in Hong Kong as a natural experiment. We analyse data from the Hong Kong Panel Study of Social Dynamics (HKPSSD) and focus on public housing residents. We find that individuals' pre‐determined socioeconomic and demographic characteristics are uncorrelated with the social cohesion of the neighbourhoods where residents are placed, which confirms the validity of our research design. Based on the design, we find that neighbourhood cohesion is positively associated with residents' life satisfaction and happiness, while it is also negatively associated with mental distress. Moreover, neighbourhood satisfaction is a significant mediator between neighbourhood cohesion and subjective well‐being. Our findings contribute to establishing a causal relationship in studies on neighbourhood effects and provide policy implications for improving well‐being among disadvantaged residents.