Happiness and Regional Segmentation: Does Space Matter?

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.