What Makes People Happy? Evidence from International Data

Individuals' life satisfaction varies widely across countries. Differences in income explain a large part of this variation, but not all. The purpose of this study is to identify the country-level determinants, in addition to income, that best explain life satisfaction, with the objective of understanding how a country's policies and developmental strategies may affect the well-being of its residents. To do so, we pool life satisfaction data and key economic, political, social, and environmental variables (including GDP per capita, unemployment rate, level of corruption, social capital, CO2 emissions and particulate matter (PM) concentrations) for a cross-section of countries to calculate the relative contribution of political, social, and environmental variables vis-a-vis economic factors to explain life satisfaction. Regression models indicate that religiosity, social capital, and pollution are among the strongest determinants of differences in life satisfaction. Employing a relative contribution analysis, we find that after individual characteristics, GDP is the most important predictor of life satisfaction, but that country fixed effects remain stubbornly important.