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Happiness and Regional Segmentation: Does Space Matter?

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Abstract

This paper examines cross-country happiness interdependencies. The sample under study includes 116 countries of diverse characteristics using averaged data for the year 2006. We divide the entire data into six groups of countries, viz., Income domain (developed and developing); Income inequality (equal and unequal); Level of political history (socialist and non-socialist). A spatial econometric technique is used to estimate the spillover effects of one country’s well-being on the well-being of the neighboring countries. Both spatial and non-spatial results indicate that corruption, health and national income serve as the best indicators of happiness for developed and equal countries, whereas unemployment affects the developing, non-socialist and unequal nations. Corruption appears to be the most significant factor, implying that a better quality government makes everybody happy. Furthermore, we find significant happiness spillovers among the above specified groups, thus indicating the importance of group clustering in the studies of happiness. The result suggests that the more homogenous the group is, the higher will be the spillover among them. We observe positive spillover for developed countries and negative spillover for socialist and equal countries. Ignoring such spatial spillover effect may lead to misunderstanding of various policy implications.

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Notes

  1. The terms well-being, life satisfaction and happiness are often used interchangeably, as empirically they seem to measure a very similar concept (Hayo 2004).

  2. Country studies include: the USA (Easterlin 1974); Great Britain (Oswald 1997); Switzerland (Frey and Stutzer 2002).

  3. For an introduction to the spatial econometric methods see for instance Anselin (1988).

  4. Ferrer-i-Carbonell and Gowdy (2007) shows that regional dummies are important for determining the relationship between environmental concerns and wellbeing.

  5. When Comparing between developed and developing countries, it is true that income and happiness are positively related and that the marginal utility falls with higher income. Higher income clearly raises happiness in developing countries, while the effect is only small, if it exists at all, in rich countries (Frey and Stutzer 2002, p. 90).

  6. A broad introduction to the relevance of happiness research for economics can be found in Frey and Stutzer (2002).

  7. World database of happiness is a comprehensive database that allows a comparison of the countries covering all continents with a wide range of economic, socio-demographic and institutional characteristics.

  8. Only countries in which all explanatory variables used in the regression analyses were available are considered.

  9. The question developed by Cantril has been used since 2006 in the Gallup World Poll. All findings gathered with this question are brought together in the collection ‘‘Happiness in Nations’’ under item type 31 Veenhoven (2008a, b).

  10. World bank world development indicators; downloadable from http://www.worldbank.org/data/wdi/worldview.html;

  11. Previous authors examining the relationship between well-being and log GDP include Easterlin (1995), Leigh and Wolfers (2006).

  12. For arguments on a satiation point in happiness, see Veenhoven (1991), Clark, Frijters, and Shields (2008), and Frey and Stutzer (2002).

  13. For more details on cross- country unemployment effects refer to (Alesina et al. 2004; Di Tella et al. 2001, 2003). .

  14. Helliwell (2003) employed panel data from 49 countries to show the existence of substantial well-being benefits from improved quality of governance (a composite measure that includes accountability, effectiveness and stability of government, the rule of law and control of corruption.

  15. One could imagine that people live long in a country but not happily, for instance because blind use of medical technology stretches out life and makes it too long. Likewise, one could imagine that people live happy in a country but not long, possibly as a result of too much indulgence.

  16. Comparison of OLS and ordinary logit regressions in fact finds differences to be negligible (Ferrer-i-Carbonell and Frijters 2004).

  17. The spatial lag model can also be estimated by generalized method-of-moments (GMM) (Anselin 2006) or by the Bayesian Markov chain Monte Carlo (MCMC) method (LeSage and Pace 2009, Ch. 5). Software packages to estimate spatial econometric models are Stata, Spacestat, Geoda (freely downloadable) and Matlab (see URL: www.spatial-econometrics.com).

  18. Negative spillover examples include regional Phillips curve reported by Anselin (1988), and a relatively few number of intra-county population densities reported by (Griffith 2003).

  19. Income inequality signals future mobility and increases present satisfaction. This implies a positive relation between income inequality and life satisfaction (the Hirschman/Rothschild mechanism). The second mechanism is that a rise in income inequality leads to an increase in relative deprivation and a decrease in life satisfaction (the Runciman/Yitzhaki mechanism).

  20. Both competing for greater well-being, however wellbeing of one is achieved at the cost of the others.

  21. If social mobility is perceived as high, (potential) welfare recipients might even fear the costs of redistribution more than they value its benefits.

  22. The spatial multiplier captures the magnitude and distribution of the spatial spillovers in the system. For a more detailed discussion see (e.g. Anselin 2003).

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Acknowledgments

We would like to thank the anonymous referees insightful comments and suggestions. We also thank the financial support for this project from Jubilee Foundation for Economic Ethics.

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Authors and Affiliations

  1. Department of Industrial Economics, Tamkang University, 151 Ying-Chuan Road, Tamsui, New Taipei City, Taiwan

    Chun-Hung A. Lin & Suchandra Lahiri

  2. Department of Economics, National Central University, Taoyuan, Taiwan

    Ching-Po Hsu

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  1. Chun-Hung A. Lin
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  2. Suchandra Lahiri
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  3. Ching-Po Hsu
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Correspondence to Chun-Hung A. Lin.

Appendix

Appendix

See Tables 7, 8 and 9.

Table 7 List of developed and developing countries
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Table 8 List of equal and unequal countries
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Table 9 List of socialist and non-socialist countries
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Lin, CH.A., Lahiri, S. & Hsu, CP. Happiness and Regional Segmentation: Does Space Matter?. J Happiness Stud 15, 57–83 (2014). https://doi.org/10.1007/s10902-013-9416-0

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