Happiness and Foreign Aid

Abstract

One of the most interesting developments in economics in recent years has been the growth of research on happiness. In separate studies, happiness has been linked to income, inflation, inequality, unemployment, self-employment, voluntary work, marriage, and even watching television (see Frey, Happiness: A Revolution in Economics, 2008 for a useful survey). Other studies on happiness have concentrated on the role of political decisions and institutions. For example, Dorn et al. (Social Indicators Research 82, 2007) attempt to identify whether happiness is related to democracy. None of these studies have unravelled another important source of happiness for many individuals: the level of foreign aid given or received by their respective countries. The present study is the first to fill this void. We first estimate the nexus between donor aid (DA) and donor happiness (DH). Aid is defined as aggregate aid given to all recipients by a donor as a percentage of the donor’s GDP. The control variable, which is hypothesized to affect both aid and happiness, is income (defined as the natural log of donor’s real per capita GDP) denoted by DI. In addition, donor inflation and unemployment rates denoted by DF and DU, respectively, are used as controls variables in the happiness regression. Data on aid are from OECD. Data on happiness are from the World Database of Happiness. All other data are from the World Bank. The sample covers 23 donors in the years 1982, 1990, 1996, 2000, and 2004, the years for which happiness surveys Atl Econ J (2009) 37:325–326 DOI 10.1007/s11293-009-9175-9