Life Satisfaction and Public Finance: An Empirical Analysis in the European Union

Abstract

Our study examines the impact of social and macroeconomic indicators on happiness score, using panel data from the “World Happiness Report”. We conducted fixed effects and year-fixed effects regressions, aiming to analyse any potential changes in the way that the considered variables affect the reported life satisfaction. The database consists of panel data for the period 2011-2023, including all the member states from the European Union. Firstly, we considered the original happiness score assigned to each country, then created a dummy variable taking value one for higher happiness scores compared to the average. Our findings suggest that GDP per capita remains statistically significant but has a lower coefficient in the regression with a dummy dependent variable.