Economics of Happiness

This paper analyzes the effects of several common, objective macroeconomic variables on the subjective independent variable, life satisfaction (as measured on an indexed scale of 1 to 10 by the New Economics Foundation). We have formulated a model that in theory will allow one to estimate the unit change effect on life satisfaction by changing different independent variables. The independent variables used are: GDP per capita, Political Stability, Economic Freedom, Unemployment, Gender Inequality and Life Expectancy. Utilizing a panel data set including 34 countries across the world for the year 2000 and 2005, our results showed that life expectancy and GDP per capita were the only variables that have a significant connection to life satisfaction. This paper discusses our research objectives, determined functional form, and analysis of empirical results