Can We Buy Happiness?

Master’s Thesis

Beata Gabrielova

Economics

Department of Economics
Faculty of Social Sciences

May 2022
Preface

This thesis was written as a completion of the Master in Economics at the University of Oslo. I
would like to thank my supervisor Geir Bjarne Asheim for his valuable comments, patience and
kind approach. I am also deeply grateful to Manudeep Bhuller for his insightful suggestions. I
thank the people from my hometown, without whom the survey would not be possible to carry
out. Also, my family and friends deserve gratitude for their help and support during my studies.

Eviews is the software used for estimations.

All inaccuracies or flaws are my responsibility.

Beata Gabrielova
May 2022

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Abstract

The main purpose of the thesis is to discuss the determinants of happiness and, in particular,
to ask whether economic variables like income helps us to be happy. The thesis analyses various
approaches of well-being and progress measuring, where gross domestic product is perceived
as an insufficient indicator. It also defines individual determinants that affect our well-being
positively or negatively and tries to place the problem in the context of the modern world. Such
determinants include income, age, work and employment, health, safety, etc. At the end of this
thesis, an econometric model using the least squares method is constructed and it tries to
estimate the dependence of selected determinants on the life satisfaction variable. The survey
was conducted in 2021 in the district of Uherské Hradiště, Czech Republic, and was attended
by 157 respondents. Income and money as such are important for our well-being, but only to
a certain extent. We cannot say that it makes us happier in general. On the contrary, health
appears to be a very strong determinant according to other studies as well as according to my
research.

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Contents

1. Introduction ........................................................................................................................... 1

2. Societal Progress and Well-Being Measuring ....................................................................... 3

2.1. Gross Domestic Product ............................................................................................................3

2.2. Human Development Index .......................................................................................................5
2.3. Capability Approach ...................................................................................................................7
2.4. Better Life Index .........................................................................................................................8
2.5. Happy Planet Index ................................................................................................................. 11
2.6. Gross National Happiness ....................................................................................................... 13

3. The Economics of Happiness............................................................................................... 14

3.1. Basic Concepts ........................................................................................................................ 16

3.2. Development........................................................................................................................... 17
3.3. Happiness Determinants ........................................................................................................ 19

4. The World Happiness Report .............................................................................................. 26

4.1. Theoretical Framework ........................................................................................................... 26

4.2. Comparison and Evaluation of the Last Years Reports .......................................................... 27

5. Survey .................................................................................................................................. 42

5.1. Data ......................................................................................................................................... 42

5.1.1. Variables ......................................................................................................................... 43
5.1.2. Descriptive Statistics ...................................................................................................... 44
5.2. Theoretical Model ................................................................................................................... 50
5.3. Regression Model ................................................................................................................... 52
5.3.1. Problems with causality ................................................................................................. 52

6. Results Interpretation and Discussion ................................................................................ 54

7. Limitations of the Model and Recommendations for Further Studies .............................. 59

8. Conclusion ........................................................................................................................... 61

References ................................................................................................................................... 64

Appendix ...................................................................................................................................... 76
 1. Introduction

Happiness is something that people have been striving for since ancient times. Everyone
wants to be happy and satisfied, but what exactly is happiness? Happiness can mean different
things for different people. In today’s consumer society, where money comes first for many,
the feeling of happiness is associated with the feeling of having and owning. However,
happiness could be an absolute trifle.

“Being happy is a decision” – something that does not have to be far from the truth.
Theory of quantum consciousness (an evolving field combining quantum physics and
philosophy) claims that our life is actually quantum physics in practice. The objective and
independent universe, or the world each of us, is truly a refined illusion. There are only
subjective universes that we create by what we focus our attention on, how we think and how
we behave. One realises that by controlling our own mind, one will begin to live a completely
different reality. Many people live in captivity that something goes wrong, and they are
unhappy. However, it is only a restriction of their own consciousness and non-freedom. In fact,
everyone has the opportunity to create the reality of being happy and satisfied if one wants to,
and the possibility is infinite.

Not only quantum physicists, but also economists are trying to find answers to questions
of happiness. The economics of happiness is a field trying to determine key factors that have
positive or negative impact on happiness and life satisfaction. This thesis identifies multiple
determinants, while other studies focus only on a particular one.

As the title of the thesis suggests, the main question is whether money can buy
happiness. Firstly, the thesis will provide a discussion of different approaches of societal
progress and well-being measurement. It will consider the topic beyond the gross domestic
product and evaluate the individual approaches. Secondly, it will be focused on the economics
of happiness itself, its concept, development and current knowledge. Subsequently, it will deal
with individual determinants of happiness, which could be beneficial for economic policy-
making in order to increase the well-being and life satisfaction of the population. There will also
be a discussion and comparison of the world happiness reports which are published annually

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by the Organisation for Economic Co-operation and Development. An evaluation of happiness
in terms of migration, politics and populism, charity, social media, the environment and the
COVID-19 pandemic will be also mentioned within the thesis. Finally, an empirical study will be
presented, which will try to estimate the association between exogenous variables such as
income, age, work, safety and health, and endogenous variable of life satisfaction. The cross-
sectional data come from a questionnaire survey conducted in January 2021 in the district of
Uherské Hradiště, Czech Republic. In total, I have managed to receive answers from 157
inhabitants of the district. Due to the study of R. Easterlin (1974) and my personal perspective,
I do not expect any relationship between income and life satisfaction. However, other
hypotheses are based on the knowledge of previous studies and therefore no correlation is
expected between the endogenous variable and the age variable. Nevertheless, the hypotheses
of the remaining variables will assume a positive relationship to the life satisfaction variable.
The results will be interpreted and discussed.

This Master’s thesis intends to be a kind of economics guide to happiness, explain

happiness from an economic point of view and prove that even very different disciplines such
as economics, psychology and sociology, can cooperate together.

“Happiness can be found even in the darkest of times, if only one remembers to turn on the
light”

J. K. Rowling

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 2. Societal Progress and Well-Being Measuring

The traditional approach to societal progress and well-being measuring based only on
economic activity is currently considered as insufficient. The well-known GDP was created as
an indicator of short-term economic activity and longer term economic development, however
over time it began to be mistaken for an indicator of well-being. Therefore, a number of
initiatives have emerged, which search for such an indicator being able to measure the rate of
societal progress also with regard to social, environmental development and economic
development.

2.1. Gross Domestic Product

This subchapter deals with the question of why this indicator is perceived as insufficient,
and what are its limitations as a measure of progress and well-being.
Gross Domestic Product (GDP) is the final monetary value of goods and services
produced in a given period and in a certain territory. One of the reasons why GDP is an
insufficient indicator is lack of important societal features such as crime and discrimination.
Also, income distribution is not involved as well as climate change and depletion of natural
resources. Generally speaking, gross domestic excludes non-market activities (such as leisure),
which in fact contributes to increasing consumption and welfare. In the case of leisure, it is
appropriate to ask what will happen if there is a change over time. Childcare is such an example.
If childcare is shifted from the home to the public sector (kindergarten, etc.), GDP is able to
capture this as an increase without subtracting the reduction in home production. Childcare is
charged and therefore is reflected in GDP. It is important to point out that it is not a problem
that GDP does not measure everything as long as the things that are not measured do not
change over time and stay unmeasured.
Pavelka (2010) also contributes to the debate with his suggestions and adjustments,
and confirms the statement above. He argues that it would be appropriate to include:
- The value of leisure - In the free time, people can spend time with their families, hobbies,
education, etc., and this time undoubtedly contributes to the quality of life. However,
it does not have market expression (value), and is therefore not included in GDP.

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 - The value capturing work at home – cooking at home instead of going to a restaurant,
helping to a neighbor, etc.
- Shadow economy – illegal activities. However, GDP tries to include estimates.
- Deduction of environmental damage – The production of goods and services often
damages the environment, which has a negative impact on quality of life and GDP
includes output only.
There are also goods and services that cannot be given a price. For instance, services provided
by the public sector, such as education. In this case, it is difficult to assess the real volume of
production or services, because it is only the amount of costs incurred, which is included in the
value of GDP.
Although gross domestic product is supposed to represent domestic production, part
of this production is owned by foreigners. GDP includes also investments, which represents
services being enjoyed in the future, and that is why some argue against GDP as a measure of
well-being. On the other hand, some studies admit that investment should be included in the
measurement of well-being, because it depends not only on current consumption, but also on
future consumption (Dynan & Sheiner, 2018). Voluntary investment in education could be the
case. If one decides to invest in education, then one can understand to work hard now instead
of having a good time. However, his/her well-being will increase in the future due to a higher
income, position in society or more interesting employment. And this choice increases dynamic
well-being, even if a person has to sacrifice now.
A good indicator should consolidate economic, social and environmental elements.
There have been some attempts to create such an indicator. However, some also point out the
danger of only one indicator and propose “a dashboard” of several indicators, which would be
closely related. One of them is the Genuine Progress Indicator (Kubiszewski et al., 2013). The
Genuine Progress Indicator (GPI) tries to cover the economic, social and environmental areas.
There are individual variables in each of these groups creating the GPI value. The indicator
contains a total of 26 components including air pollution, ozone level, wooded area, etc. One
example we can demonstrate the difference between GDP and GPI is in the state of Vermont.
Before 1970, the GPI exceeded GDP. While the GPI has not changed much over time, GDP has
started to grow. In 2011, the GDP was about 40% higher that GPI. However, higher GDP was
accompanied by increasing income inequality and growing fossil fuels dependence (Ceroni,
2014).

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 According to Ivković (2016), the GDP as a measure of development is not good enough
because it does not include our health, education qualities, safety, intelligence, quality of
relationships. Also Robert F. Kennedy has said that GDP measures everything except that which
actually really matter. Another problem could be facing to delay. The GDP data are collected
on a quarterly basis, but the society requires a variable collected monthly.
Another criticism points to the confusion of GDP and prosperity. It is not always
prosperous when GDP grows. An example is flooding. The consequent need to repair the
damage will cause growing GDP. But surely every country would prefer lower GDP than dealing
with consequences of this natural disaster. This is also an example of the fact that GDP does
not take into account environmental degradation (Nečadová, 2012).
Despite all the criticism, GDP is still a useful tool for macroeconomic policy as an
indicator of a short-term activity. Therefore, we should not eliminate GDP yet but rather wait
until it is replaced by a more suitable indicator. Some economists claim that the replacement
of GDP with a better indicator is not happening yet due to the imperfections of all the
alternative indicators (which are discussed in the following sub-chapters). On the contrary,
other economists are calling for the complete elimination of GDP, because it provides
misleading information and influences our decisions in a wrong way (Van den Bergh, 2009).
Analysing the data, we determine that Luxembourg, Switzerland, Ireland, Norway or
Switzerland are among the top countries with the highest GDP per capita (PPP), while Burundi,
Somalia, Mozambique or Central African Republic are countries with the lowest GDP per capita
(PPP).

2.2. Human Development Index

Human Development Index (HDI) is probably one of the best-known indices measuring
economic development and well-being. This index was introduced in 1990 as part of the first
Human Development Report (Syrovátka, 2008). HDI embodies what is known as Amartya Sen’s
Capability Approach (see 2.3.), and considers access to health, education and goods as a major.
In essence, it is an index of the life development (Stanton, 2007). HDI is calculated as an
arithmetic average of the following indexes - Income index, Longevity index and Education
index (Harttgen & Klasen, 2012):

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 !
𝐻𝐷𝐼 = " (𝐼𝑛𝑐𝑜𝑚𝑒 𝑖𝑛𝑑𝑒𝑥 + 𝐿𝑜𝑛𝑔𝑒𝑣𝑖𝑡𝑦 𝑖𝑛𝑑𝑒𝑥 + 𝐸𝑑𝑢𝑐𝑎𝑡𝑖𝑜𝑛 𝑖𝑛𝑑𝑒𝑥),

where income index is gross national income per capita, longevity index represents life
expectancy at birth and education index indicates expected years of schooling (EYS) as well as
mean years of schooling (MYS). EYS represents a calculation of the number of years a student
is expected to attend school or university. MYS is the average number of years at school a
student has actually received. The cut-off points for the classification are 0.8696 - very high
human development, 0.7478 - high human development, 0.6465 - medium human
development and 0.4337 - low human development (Shah, 2016).
Norway, Ireland, Switzerland, Hong Kong and Iceland are among the top five countries
having the highest HDI value. On the opposite side of the table, there are countries such as
Niger, Central African Republic, Chad, South Sudan and Burundi. Norway occupies the first
position with the value of 0.957, while the Czech Republic is on the 27th place with the value of
0.900.
HDI has been criticized in the same way as GDP and, according to some, it does not
provide any significantly different picture of a country’s well-being. It might happen that the
difference between the level of economic activity and the level of human development will
deepen, which would not be possible to recognize without an indicator measuring human
development (Syrovátka, 2008).
The main criticism concerns human rights, freedom and inequality. Human
development index does not include inequality between countries, inequality within countries
or inequality, for example, between the genders (Bagolin & Comim, 2008). Following this issue,
the so-called Inequality-adjusted Human Development Index (IHDI) was introduced, which tries
to take this inequality into account (Alkire & Foster, 2010). In 1997, a very interesting study was
conducted in Latin American countries, which tried to compare HDI and IHDI results. One of
the main findings was that the countries with the inequality in income distribution were
reaching lower positions in IHDI ranking, but they were doing relatively well according to the
HDI ranking. IHDI seeks to take into account not only income inequality, but also education,
health and much more (Hicks, 1997).
Neither HDI can avoid the problem of quality data availability, where the data quality
naturally depends on the quality of the country’s statistical reporting, and it can be assumed
that developed countries will perform better than developing countries. In addition, in the case

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of non-democratic regimes, it is also necessary to consider intentional misrepresentation of
data - for example, Cuba or China (Syrovátka, 2008).
Some economists point out that HDI cannot be seen as the ultimate measure of
development and suggests two new dimensions that could be integrated into HDI –
employment and political freedoms, which would help to better reflect progress in
development. Additionally, the existence of a significant number of people in today’s world
without access to drinking water, people with insufficient daily caloric intake, people without
access to electricity and high child mortality rates, indirectly pointing to the fact that HDI does
not take into account all important aspects of human development and quality of life (Armand
et al., 2014).

2.3. Capability Approach

The author of this approach is the Indian economist Amartya Sen. He emphasized that
there are not goods as such that create wealth, but rather activities which the goods are
manufactured for. According to this view, income is important because of the opportunities it
creates. But real opportunities, or so-called capabilities, also depend on other factors such as
health. These factors should therefore also be taken into account. Alternative methods of
wealth measuring, such as human development index (see 2.2), follow these principles. Moral
principles also presuppose in a certain way equality between individuals. However, because the
ability to take an advantage of equal opportunities is different and depends on each individual,
the problem of income distribution can never be fully solved (Robeyns, 2005).
Sen considers central to what he has portrayed in the chain. According to him, one can
choose one’s own goals and achieve them with help of “capabilities” (Alkire & Deneulin, 2009).

Resource -> Functioning -> Capability -> Utility

Source: Alkire & Deneulin, 2009

The capability approach emphasizes functioning (such as long life, being happy and
participating in political life), while utility is defined by happiness, desire or fulfilment (income,
assets). Sen emphasizes above all: freedom of choice, activities that create happiness, etc.

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Functioning is a part of an ensemble that forms the well-being of an individual. The basic
principle is the freedom or opportunity of an individual to function (activity). Functioning is, for
example, starvation and the capability to obtain some food, and this is crucial in measuring
human well-being. Capabilities are characterized as a set of individual functions that are
feasible for humans. Everyone has them and they play a major role in the growth of utility.
Resources are an entry into a chain (e.g. a bicycle) and its value depends on the individual ability
to turn this mean into function (cycling). However, it depends on the physical and mental
condition of the individual, social norms or the environment (Alkire & Deneulin, 2009).
This approach has also been criticized (Alkire, 2005). Above all, the criticism concerned
how these capabilities should be measured and compared, as well as what skills should be
selected for study. Capability approach is also often criticised for being too focused on a reason
and neglecting emotions, empathy and emotional maturation, but reason itself is not enough
to maintain a reasonable society (Gasper, 2002). As mentioned above, the Human
Development Index (HDI) discussed in 2.2 tries to address the problem of capability approach.

2.4. Better Life Index

Better Life Index (BLI) was created by the OECD organization in 2011 and its values are
available for all 37 member countries, as well as for three other candidates – Brazil, Russia and
South Africa. BLI is a tool that encourages the public to measure well-being according to their
own values and preferences, which includes 11 dimensions of well-being – housing, income,
jobs, community, education, environment, governance, health, life satisfaction, safety and
work-life balance (Durand, 2015). All of these dimensions are also included in Bhutanese Gross
National Happiness, but in a different form and with different weights. Based on the values of
the dimensions above, all countries were assigned a score of 0 to 10 points. However, low
values in some of the dimensions do not necessarily mean their objectively poor condition, as
the evaluation is largely relative. The comparison of countries is based on the weighted sum of
the individual areas (dimensions), where each visitor of the OECD webpage can set the weights
according to their own preferences in the range from 0 to 5. The ability to determine your own
weights is beneficial, for instance, to find the best place to live for a particular person. However,

8
this variability in the evaluation of the data obtained causes chaos in terms of objective
classification of countries (Kasparian & Rolland, 2012).
Krason (2014) criticizes BLI and points out that it is remarkably similar to other indices
and therefore does not contain anything new. In terms of religion, good family relationship and
morality, BLI does not focus on the human soul, which is the main source of human happiness.
Norway is at the top of the ranking, while Mexico is among the very bottom countries.
Comparing the two countries (due to data availability), there are some numerical facts. 8% of
the Norwegian population live in relative income poverty, compared to 17% of the population
in Mexico. 15% of poor households spend more than 40% of their income on housing costs in
Norway. 18% of poor households in Mexico spend more than 40% of their income on housing
costs. 4% of Norwegians and 15% of Mexicans say that they have friends or family to support
them when needed. Low life satisfaction was reported by 4% of Norwegians and 5% of
Mexicans.
In the figure 1, we can see how the individual Norwegian regions are doing.

Figure 1: Comparison of Norwegian regions within the BLI

Oslo Hedmark and Oppland

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South-Eastern Norway Agder and Rogaland

Western Norway Trøndelag

Northern Norway

Source: OECD (2021)

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 As we can see – Oslo, Western Norway and Trøndelag are regions with the highest value
of safety. Housing reached the lowest value unsurprisingly in Oslo, probably due to reduced
availability and high prices. One would expect the highest jobs value in Oslo because of higher
opportunities and possibilities than in other parts of Norway, however, these expectations
were not met. The highest value of jobs, including job security, personal earning, long-term
unemployment rate and employment rate, was found in Trøndelag. On the other hand, income
(including household net wealth and household net adjusted disposable income) reached the
highest value in Oslo. It is interesting to note that access to services in Northern Norway is at
the same level as in the capital. Regarding life satisfaction, the highest value is found in the
Trøndelad area, while the lowest in Heddmark and Oppland.

2.5. Happy Planet Index

Happy Planet Index (HPI) is another concept in measuring well-being and environmental
impact and it was launched by the New Economics Foundation in 2006. HPI takes into account
3 main components, primarily life expectancy (measured in years), life satisfaction (measured
on a scale of 0-10 satisfaction points) and ecological footprint (measured in global
hectares/gha).

𝐿𝑖𝑓𝑒 𝐸𝑥𝑝𝑒𝑐𝑡𝑎𝑛𝑐𝑦 ∗ 𝐿𝑖𝑓𝑒 𝑆𝑎𝑡𝑖𝑠𝑓𝑎𝑐𝑡𝑖𝑜𝑛

𝐻𝑃𝐼 =
𝐸𝑐𝑜𝑙𝑜𝑔𝑖𝑐𝑎𝑙 𝐹𝑜𝑜𝑡𝑝𝑟𝑖𝑛𝑡
Source: Campus & Porcu (2010)

Regarding life expectancy, Hong Kong and Japan do the best with their 83.6 years and
83.2 years. On the other side of the table, there are countries such as Swaziland and Lesotho
(only 48.9 years). In terms of life satisfaction, rich and developed Western countries dominate,
while African countries such as Togo or Benin are at the bottom of the table. Nevertheless, the
smallest footprint was found in the countries of Haiti or Bangladesh. Luxembourg, Australia,
Hong Kong and the United States of America have the biggest environmental footprint.

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 Overall, according to the Happy Planet Index, the people of Costa Rica, Mexico and
Colombia lead the happiest lives, taking into account its long-term sustainability. In general, the
sub-region of Central America, Mexico and Caribbean do the best, while the sub-region of East
Africa ended up on the very bottom. Western Europe occupies 7th place out of 19 (Abdallah et
al., 2009). Paradoxically, none of the “happiest countries” (Costa Rica, Mexico, Colombia)
achieved such a result in any of the studied areas that would place them among the top five
countries. We can therefore assume that Costa Rica and Mexico reached the top partly due to
the good values of the life expectancy and satisfaction of population, which were not much
affected by their inequalities, and the population did not require high consumption of goods.
In terms of ecological footprint, both countries were ranked in the lower half, but the value of
this indicator was half that of most developed countries, which I find to be the main reason for
the leading positions of Costa Rica and Mexico. This justification is even more evident in the
case of Colombia. Personally, I consider the HPI to be more of an indicative indicator that is too
influenced by ecological footprint. Within all indices presented so far, the value of HPI is
relatively low in case of the Czech Republic. The reason is the high value of the ecological
footprint, which is in the denominator of the formula - meaning higher the value, the lower the
overall HPI. Perhaps the interpretation of the “happiest countries” should be adjusted for
example: “Costa Rica, Mexico and Colombia are the happiest countries within those countries
that have a relatively low burden on the Earth’s ecosystem”. Another criticism that is often
raised against HPI is that the subjective assessment of life satisfaction is often burdened by a
certain value orientation, which differs across countries and continents, so it is often argued
that this index is very difficult to compare between different cultures (Heřmanová, 2012).
The comparison of HPI and HDI is also very interesting. In countries with low HPI, there
is low HDI and vice versa. The countries at the top of the HPI table reach middle level of HDI
and many countries with high HDI do poorly according to HPI. The relationship between HPI
and HDI can be calculated using the so-called Spearman’s coefficient rs showing a positive
association between the indices, and is equal to 0.24 (Campus & Porcu, 2010). Thus, as has
already been said, HPI includes an ecological footprint, which has a negative impact on future
well-being, while HDI including GDP and investments in turn has a positive effect on future well-
being. However, these investments might be positive because of the large environmental
footprint. I can support this statement by saying that the developed countries of the Western
world such as Luxembourg, Australia, the United States of America, Canada, Sweden, Iceland,

12
Switzerland and many others have the highest ecological footprint and the highest GDP leading
to a high value of HDI. GDP is included in the numerator within the HDI formula, which increase
the value of the index. On the contrary, the ecological footprint within the HPI is in the
denominator, which reduces its final value. It is therefore appropriate to state that HDI and HPI
measure well-being in very different ways.

2.6. Gross National Happiness

Gross National Happiness (GNH) is another approach used to measure well-being and
happiness. This concept was found in Bhutan under Jigme Singye Wangchuck, the Fourth King
of Bhutan, and tries to express the quality of human life and the development of society by a
general indicator that follows Bhutan’s culture and spiritual values (Bates, 2009). The gross
national happiness index consists of 9 domains, namely – living standards, health, education,
time use, good governance, ecological resilience, psychological well-being, community vitality,
and cultural diversity and resilience. Living standards refers to income, assets and housing and
time use to work and sleep. Community vitality means donations, community relationships,
family and safety. GNH is composed of 4 pillars – sustainable development, good governance,
environmental conservation and preservation and promotion of culture, and its purpose is to
identify key areas for effective development. Within GNH, people are divided into 4 groups
based on their answers: unhappy, narrowly happy, extensively happy and deeply happy. The
process of assigning a person to one of the groups is quite complicated. For each subcategory,
the so-called sufficiency threshold was determined, which divided people into two categories
– sufficiently satisfied and not sufficiently satisfied. For example, in the subcategory of life
satisfaction, 5 questions were asked on a nominal scale from 1 to 5 (the more, the better), so
the sum of the points for one respondent had to be in the range from 5 to 25 points.
Subsequently, people with the sum in range 20-25 were classified as sufficiently satisfied and
those with less than 20 points were found being dissatisfied.
GNH has also entered the sphere of business in recent years and entrepreneurs try to
reflect its values in their companies as well. Bhutanese believe that happy workers can perform
more effectively (Centre for Bhutan Studies and GNH, 2021). GNH is also promoted in the
United States by Gross National Happiness USA (GNHUSA). Vermont-based GNHUSA is a non-

13
profit organization that aims to increase personal happiness and collective well-being by
changing the way the United States measures its progress and success. Also, the Czech Republic
was not idle and based on the GNH, the Endowment Fund of the Happy Czech was established.
It introduced the calculation of gross national/domestic happiness in the Czech Republic, seeks
to increase the awareness of the population of this concept and supports projects with the
potential to improve happiness in the country (Šťastné Česko).
However, not everyone imagines Bhutan as heaven on earth. In the late 1980s,
Nepalese-speaking Bhutanese were deprived of their citizenship and subjected to unpleasant
treatment by the Bhutanese government. In the 1990s, many Bhutanese fled the country, and
Bhutan essentially expelled 1/6 of the country’s population. Therefore, there are opinions that
gross national happiness is not the right expression, while gross national hypocrisy is (Shrestha
et al., 1998).
According to some, it is absurd to measure happiness because it is a feeling and it is
more of the current state of mind, for example. Happiness is illusive and a person living in a
country with famine could be extremely happy when receiving two loaves of bread. Amartya
Sen (2008) lists an exemplary situation – a person living in a very poor area would suddenly
receive a small income. He/she would feel happy, but we cannot consider this as in
improvement of overall well-being. However, if such a respondent were asked, then the
answers would contribute to the positive outcome, improving general well-being in society.
Likewise, mentally labile people and people with different disorders could cause some
problems. The emotional range of these individuals is different, which could cause the
inaccuracy of measured results and reduce policy quality adapted to measured values.

3. The Economics of Happiness

The economics of happiness or happiness economics is a branch of economics, where

traditional economics interacts with other fields such as psychology or sociology. It aims to find
both positive and negative determinants of our satisfaction and well- being (MacKerron, 2012).
The happiness economics assesses welfare by using economic or psychological tools and it
relies on self-reported happiness in different countries. This direction relies on interaction

14
between rational and non-rational influences in determining economic behaviour (Graham,
2005).
With regards to this topic, not only Richard Easterlin (whose theory will be discussed
later) but also Tibor Scitovski (1976) contributed to the discussion on happiness economics. He
recommends spending money on elements we do not have to adapt to. Scitovski explains that
on an example of meeting good friends, which fascinates us in a way and gives us a sense of
fulfilment. On the contrary, we should avoid consuming goods that we need to adapt to, such
as buying a new sofa. This pleasure is just temporary and will fade over time. Scitovski divides
consumption into “joyful” and “joyless”. As an example, he describes the American way of life
based on huge consumerism as joyless, where also the name of his book itself comes from –
joyless economy.
Neoclassical economics focuses on the utility and subjective satisfaction from
consumption of a good. If individuals are supposed to be rational, fully informed, and looking
to maximize utility, then the choices they make are the ones maximizing the expected utility.
The higher the utility, the higher his/her personal satisfaction with the choice. However,
economists and psychologists find preferences not to be always a good means of subjective
well-being associated with consequences of choices and are leaning towards alternative
thinking and measuring benefits (Dolan et al., 2008). Hausman (2011) says that not only
preferences themselves are the things we should be interested in. According to him, the
importance should also be given to the reason behind - why the individual prefers x to y, and
presents an example of a student. The student prefers x to y, where he gets A in math and B in
history (in the case of x), while B in math and A in history (in the case of y). It is important to
ask why he/she has these preferences. A better grade in math might be more important for
him/her because he/she wants to graduate in math or physics in the future. It might be that a
future career as a physics teacher is more promising for him/her than a career of a history
teacher, and that it is what determines his/her preferences.
Happiness is not the same as the traditional concept of utility, but they are closely
related. The advantage of the happiness concept over utility is that it encompasses many other
aspects of well-being (Frey and Stutzer, 2002). Preferences depend on reference (Mlčoch,
2007), which is the basis of behavioural economics. The explanation of this dependence says
that a human decision-making depends on the point, which the alternatives are compared to.
In the happiness economics, this effect could occur, when comparing personal satisfaction or

15
happiness within the social group one lives in. Kahneman (2012) also points out that individuals
make significantly more decisions based on emotions than rational information, which adds
importance to the determinants of happiness.

3.1. Basic Concepts

The essential and the most difficult question is: What is happiness? Everybody is
certainly able to recognize the state or feeling of happiness. However, the question is how to
define it? Happiness in terms of current feeling or happiness as long-run well-being?
There are three basic concepts in the field of happiness economics, namely – happiness,
subjective well-being, and life satisfaction. It is almost impossible to distinguish these three
terms from each other, however there have been some attempts to do it.
Quality of life was the very first estimation of happiness. At the beginning of the 20th
century, the quality of life was measured mainly materially, which gradually began to change in
the 1960s, and happiness began to be considered from an unmaterialistic point of view
(Hamplová, 2006). Although happiness could be viewed from a different perspective, the
problem of definition has not been solved yet. Happiness could be understood as a synonym
to joy or it could be a by-product of various activities, important and meaningful for an
individual (Delle Fave et al., 2011). Happiness could be also defined as the sum of the
momentary utilities over a time period (Kahneman & Krueger, 2006). Frey and Stutzer (2002)
interpreted happiness as an ultimate goal of life and something that everybody wants to reach,
hardly described by words. It is also good to consider happiness from two perspectives –
subjective and objective (Frey & Stutzer, 2010).
Subjective well-being is another important term within this topic. Subjective well-being
is a self-reported valuation of life, which includes three main categories – life evaluations,
positive emotions and negative emotions (Helliwell & Barrington-Leigh, 2010). According to
them, it includes two components – individual’s personality and his/her attitude to life events.
Life satisfaction reflects different circumstances of a person’s life, while our feelings and
emotions are volatile. However, emotions help us to understand good and bad times in our
lives (Helliwell & Barrington-Leigh, 2010).

16
 Despite the different definitions of the terms, happiness, subjective well-being and life
satisfaction have one thing in common. They emphasize the subjectivity of the evaluation. Thus,
people are considered to be happy if they really feel that or just say that about themselves
(Hamplová, 2006). And this master thesis also works with that fact.
Another emerging question is how to measure happiness. The answer is simple – for
now, there is no ideal method for now. Happiness is an extremely complex content, and
therefore a simplification is used for research purposes. Happiness is often replaced by life
satisfaction due to correlation of these variables (Diener, 2000). The study of Bjørnskov et al.
(2008) used the method of a 1-10 scale which is also used in the thesis’s survey. Number 1
represents complete dissatisfaction, while on the opposite side of the scale is number 10 as
complete satisfaction. The 1-10 scale method is also used by the Organisation for Economic Co-
operation and Development.
A similar scale was introduced by Diener et al. (1985) called SWLS, namely Satisfaction
with Life Scale. The SWLS contained 5 statements and an individual had to decide whether
he/she agrees with it on the 1-7 scale (1 – strongly disagree, 7 – strongly agree). The statements
were following:

1. In most ways, my life is close to my ideal.

2. The conditions of my life are excellent.
3. I am satisfied with my life.
4. So far, I have gotten the important things I want in life.
5. If I could live my life over, I would change almost nothing.
Using more questions and scales is better than using simple questions, because it can
capture the multidimensional concept of satisfaction and happiness. However, both ways of
measuring happiness and life satisfaction are surprisingly reliable (Diener & Lucas, 2000).

3.2. Development

The happiness economics has experienced a huge boom. One of the popularisers of this
economic science is undoubtedly the American economist Richard Easterlin, who dealt with
the issue of life satisfaction and happiness (Easterlin, 1974).

17
 The beginning of the happiness economics can be tracked back to ancient Greece and
many consider Aristotle to be the origin of happiness researching and thinking. In their
opinions, the ancient Greeks often had very different happiness views. For instance, Plato was
a proponent of the common good, while Aristotle preferred the personal good. Although they
differed in their thoughts and beliefs, they are united by one idea – everybody wants to be
happy (Štika, 2008).
Aristotle’s work – The Nicomachean Ethics – considers happiness to be the only goal in
life of every individual. He calls this the so-called Eudaimonia commonly translated as happiness
or welfare, which is a compound of two words – “eu” – good, well and “daimon” – spirit. All
good things, including wealth, are the only tools for happiness. How to achieve Eudaimonia?
According to Aristotle, this is done indirectly by practising of basic sincere virtues such as
friendship and love (Štika, 2008). Aristotle believes that the highest happiness is for
philosophers. Other “ordinary” people may also be happy, but not as much as philosophers. A
similar view was held by the father of modern economics – Adam Smith – who argued that
happiness is available with varying degrees to different social groups (Den Uyl & Rasmussen,
2010). Smith sees wealth only as a means to happiness. In fact, the richest can consume little
more than the less wealthy, ensuring that the wealth of society is distributed among the
poorest. And this is due to the functioning mechanism of the invisible hand. The wealth of
society is also distributed among the poorest so as to ensure their livelihood. The capacity of
the (landowner’s) stomach is incomparably less than his desire, and he will never get more than
the poorest peasant. The rest is obliged to be divided (Štika, 2008).
Another important milestone is hedonism named after the Greek word of “hedone”,
which could be understood as pleasure. Pleasure is often perceived as the highest goal of life,
but it is no longer based on an ascetic way of life. It is about life through short-term pleasures.
When comparing the two philosophies, it can be said that eudaimonism looks at happiness
from a rather long-term perspective, while hedonism focuses on the immediate state.
Hedonism was also the cornerstone of classical utilitarianism in economics (Peterson et al.,
2005).
Jeremy Bentham is considered to be the founder of this turning point in economics.
Instead of complicated happiness, he came up with a revolutionary unit of utility. Every
individual strives to maximize enjoyment and pleasure, and minimize suffering and pain.
According to Bentham, pleasure and suffering are the main driving forces of humanity. Public

18
happiness is the sum of individual utilities and therefore, utility becomes the ultimate goal of
life (Štika, 2008).

3.3. Happiness Determinants

There are several determinants of happiness, especially from the economic sphere, as
well as from the social and personal sphere. Among the most important determinants, there
are wealth, age, employment, health, safety, family environment, education or religion.
Firstly, I will focus on wealth in terms of income and gross domestic product. Richard
Ainley Easterlin was dealing with this as early as 1974. His research has clearly shown the
relationship between happiness and income of a country but only to a certain extent. He found
a positive effect of income on happiness, but only in countries with lower GDP. Once GDP
reaches a certain level, so-called “saturation point”, the happiness curve will remain flat or
begin to decline slightly (Easterlin, 1974). This statement would therefore prove the inability of
money to buy happiness, but only up to a certain level. We can apply this statement to the life
of any person. Obviously people need food, water or a place to live, however, having multiple
cars in a garage is becoming irrelevant. The study of Diener and Oishi (2000) also agrees with
the fact that poorer nations show higher life satisfaction with higher incomes, while richer
nations do not increase their satisfaction, seen in figure 2.
Income inequality gap is also related to the topic of income. So far no relationship has
been found between the size of income inequality gap and happiness. However, dividing
countries into the Western and Eastern would help to demonstrate the relationship between
these two variables. The results of a study conducted by Berg and Veenhoven (2010) indicate
a strong negative association within Western countries, while a slightly positive relationship in
countries located in the East.

19
 Figure 2: The life satisfaction-income relationship over time

Source: Diener & Oishi (2000)

A statement made by Blanchflower (2007) says that GDP growth does not lead to the
growth of happiness in developed countries. However, increasing GDP leads to greater
happiness in post-communist countries such as the Czech Republic, Slovakia, Poland and
Hungary. Based on this study, it can be said that happiness can be bought, but only in post-
communist countries. The question may be whether these results were achieved after
controlling for other changes. The equation had the set of personal controls for age, education,
gender, marital status and labour force status. Therefore, it is reasonable to assume that the
increase in personal liberty may have played a certain role.
Happiness in relation to income can also be examined from the perspective of time. The
real GDP per capita in Western countries (such as the United States or the United Kingdom) has
grown rapidly since the World War II. However, the happiness curve in these countries is seen
to be stable or slightly declining. The authors of the study point out that while people were
enjoying material well-being, such as the invention of washing machine or colour television,
happiness did not increase (Frey & Stutzer, 2002).

20
 The world we live in is very materialistic and consumerist. It might be seen that some
people buy goods they do not need, to dazzle people they do not like. With the growth of
wealth, the so-called issue of conspicuous consumption appears. It is a concept introduced by
the economist Thorstein Veblen in the 19th century. In essence, it is a signalling of social status
within the socio-economic sphere (Jaramillo et al., 2001). However, it also depends on whether
the person comes from a so-called “poor” or “rich” environment. The “poorer” the starting line
or comparison group, the more individuals tend to succumb to the phenomenon of
conspicuous consumption (Charles et al., 2009). Basically, it does not matter how rich a person
really is, people just want to give an impression of being rich. Examples of such conspicuous
consumption can be seen all around us – expensive cars, handbags, jewellery. Many people are
able to borrow money for summer vacations, the latest iPhone or Christmas gifts. Is that what
makes us happy? Showing others that we “can” afford it? It might be that low-income
consumers exchange “real consumption” for “conspicuous consumption” and they do not even
realise that building such an illusion of wealth will sooner or later lead to great financial
problems.
Age is another discussed determinant. Clark and Oswald (1994) have clearly shown that
the age-happiness curve is U-shaped. The lowest values of happiness were measured within a
group of people in their mid-thirties. The reason could be having children because the study
claims that children have a significant negative effect on individual’s happiness, especially in
their young age. Hellevik (2017) came up with a different view, arguing that happiness can vary
between age groups and that the relationship between these two variables does not have to
be U-shaped at all. In the study, he found out that happiness declines between the ages of 15
and 19, mainly because many young people leave their family home at this age. After the age
of 20, happiness begins to rise again and reaches its peak around the age of 30 in the time of
having a life-partner. After the birth of children, the happiness curve starts to decrease again.
After the celebration of the 70th birthday, happiness will start to increase slightly again.
Oppositely, there is an argument that the loss of a loved one, a husband or wife will significantly
reduce our happiness (Calvo, Haverstick & Sass, 2009).
Job, work environment or (un)employment also influences our satisfaction and
happiness. Di Tella and MacCulloch (2001) were focused on unemployment and inflation in
their research and clearly demonstrated that high unemployment and high inflation have a
negative impact on well-being of the population, resulting in psychic and social costs. Figure 3

21
shows how satisfied are employed and unemployed people in European countries between
1970 and 1990. Obviously, there are higher values of satisfaction registered among employed
people. The vertical axis measures the proportion of people being fairly satisfied. (Oswald,
1997). Relating to (un)employment, doubts may arise regarding some other factors that may
correlate with life satisfaction and unemployment, such as income, education, etc. However,
the study of Carroll (2007) proved that unemployed individuals are less satisfied with their lives
even after controlling for income, health, human capital, local economic conditions and non-
wage income.
Additionally, parental job loss also plays a role in relation to happiness, especially
happiness of children. A child is more likely to be less happy, when one of parents becomes
unemployed. The interesting thing is that a child is less happy if the father loses his job,
compared to the mother losing her job. However, this varies with age. The happiness of the
little ones could even increase when parents lose their jobs because then they can afford to
spend more time together (Powdthavee & Vernoit, 2013).

Figure 3: Satisfaction comparison of employed and unemployed persons

Source: Oswald (1997)

Also, the age at which people lose their job can have some effect on happiness. Younger and
older people are much better to cope with job loss. Likewise with gender, men bear the loss of

22
a job much worse than women. Even unemployed individuals with higher education
demonstrate lower happiness points than unemployed individuals with lower education (Frey
& Stutzer, 2002). It is also worth mentioning the comparison of self-employed and individuals
employed by someone else. Overall, the self-employed are much happier with their lives
(Binder & Coad, 2016). There are also studies saying that the unemployed partner has a
negative effect on the one who works. On the other hand, this state of being jobless is beneficial
for the unemployed individual himself/herself. In terms of hours spent at work, life satisfaction
increases with growing number of hours but only up to a certain point. If there is an excess of
hours, satisfaction decreases. The curve of life satisfaction depending on the hours spent at
work has the shape of an inverted letter U. The impact of working time also depends on
whether the number of hours was chosen voluntarily. Other studies have proved that part-time
work is associated with lower satisfaction, especially for men (Dolan et al., 2008).
Good health can be described as another predictor of a happy and satisfied life. Being
healthy has a positive effect as well as self-reported health (Gerdtham & Johanesson, 2001).
Dolan et al. (2008) distinguish between mental and physical health, where mental health is
related to well-being way more than physical health. Oswald and Powdthavee (2008) speak
about adaptation. An individual can adapt to his/her condition and for example, the impact of
being disabled is reduced over time. A person simply gets used to the new situation. However,
disability reduces overall happiness. Healthcare also plays a very important role. Nations with
higher investment in mental healthcare seems to be happier than those with lower investment.
This has unsurprisingly something to do with the development of a country. The authors of the
study also controlled for economic affluence to avoid any doubts, and they used a variable
measuring the mental health budget as a share of the total health budget (Touburg &
Veenhoven, 2015).
Now, we will be focused on safety and security as one of the possible determinants of
happiness. Being a victim of a crime or knowing a victim of a crime results in lower overall
happiness. Also living in an unsafe neighbourhood reduces the feeling of happiness (Cheng &
Smyth, 2015). The finding concerning South Africa says that the happiness gap between victims
of crime and non-victims is minimal. The reason may be the high crime rate and people simply
adapted to these conditions. Expressed by numbers – if the crime rate exceeds 11.2%, people
will get used to it, and happiness does not change (Davies & Hinks, 2010).

23
 Family, relationships or marital status undoubtedly belong among happiness
determinants too. As can be seen in the figure 4, the married individuals are the happiest.
However, it is important to be satisfied in the marriage. Living in a dissatisfied union causes
lower happiness (Eren & Aşıcı 2017). On the other hand, marriage itself provides financial
support in case of need and married people can afford better housing and food. Marriage also
provides psychological support in case of illness or other difficulties (Stack & Eshleman, 1998).
This result is also confirmed by other studies. Long-term relationships show higher satisfaction,
but the highest happiness can be found in a satisfied marriage. On the contrary, separated or
divorced partners show lower satisfaction with their lives. There is an evidence suggesting -
while men and women appear to suffer the same after death of a spouse, divorce or separation,
divorced or separated women may in fact be happier than women in marriage. In general,
stable and confidential relationships are beneficial for well-being, while breakdowns of
relationships are detrimental (Dolan et al., 2008).

Figure 4: Marital status-happiness relationship

Source: Eren & Aşıcı (2017)

24
Relationships between individual family members are also important. Unsurprisingly, good
relationships are associated with a higher level of happiness, while people from dysfunctional
families feel less happy (Botha & Booysen, 2014).
In the field of education, some studies show a positive relationship between higher
education and happiness. Other studies argue that secondary education is associated with the
highest satisfaction. It has also been mentioned that education has a positive effect in lower-
income countries and that education is more likely to correlate positively with income and
health. Graham and Pettinato found that years of education, especially in Latin America,
increased the overall happiness of the locals (Dolan et al., 2008). Hartog and Oosterbeek (1998)
are also inclined to believe that people with higher level secondary schooling achieve the
highest happiness, and that IQ (intelligence quotient) plays no role at all. Generally speaking,
most authors do agree with the statement that education has a positive effect on individual’s
happiness, and Castriota (2006) gives several reasons why. People need a certain minimum of
education for everyday life. Education is also a signal for people around and a symbol of
prestige. Related to this, it gives the possibility for better employment and higher salary.
Education also affects our happiness directly through self-confidence and human capital.
Another interesting determinant is religion. Religion and being a believer is generally
associated with a higher level of happiness. However, it is necessary to analyse the picture in
detail. If we analyse the happiness of countries, we have to focus on the different religions
occurring in a given country. Mutual tolerance and understanding is important. If different
religions perceive each other as enemies or as threats of their own interests, then we can see
a significant reduction in the level of happiness (Mookerjee & Beron, 2005). One of the
variables positively correlated with happiness is religiosity measured by participation in
worships. Reasons that cause an individual’s happiness include rewards in the afterlife, spiritual
and material rewards in contemporary life, and community friendships. An interesting topic is
the so-called Blue Laws of the United States from the 19th century, which restricted work and
shopping on Sundays in order to preserve Sunday as a day of worship and rest. If they were
abolished, the attendance of churches would decrease and people would engage in other
activities such as shopping. In the 19th century, the United States introduced an almost total
ban on entertainment, sports, and retail activities on Sundays. However, these laws were later
repealed, due to lobbying activities and the conflict with the Jewish religion, which considers
Saturday as the day of rest. The Blue Laws were subsequently repealed, and many believe that

25
subjective well-being has declined due to the decreasing attendance at worship. While the
repeal of these laws suggests a negative effect on women’s happiness, it has no effect on men.
The reason could be the reluctance of women to work on Sundays, because the data does show
that employees generally do not like working on Sundays (Cohen-Zada & Sander, 2011).
There are numbers of other determinants and factors that affect our happiness and life
satisfaction. For example, social trust is associated with higher life satisfaction. Confidence in
key public institutions, such as police, legal system or government, is also associated with
higher satisfaction. The preference of democracy and capitalism increases happiness especially
in Latin America and Russia. There is evidence suggesting that pollution has a detrimental effect
on overall happiness. Regarding urbanization, a positive relationship between rural life and life
satisfaction, and a negative relationship between urban life and life satisfaction, has been
shown (Dolan et al., 2008).

4. The World Happiness Report

4.1. Theoretical Framework

The World Happiness Report is an annual report published by the United Nations
Sustainable Development Solutions Network. It evaluates happiness around the world,
countries are ranked and then explanations are made. They try to examine why some countries
are happier than others. The primary data source is the Gallup World Poll. Although the reports
have been published regularly every year since 2012, I will be focused only on the reports from
the years of 2018, 2019, 2020 and 2021 due to their timeliness. Each report has its own sub-
topic. Is our happiness also affected by problems of today’s society such as migration, social
media or Covid-19 pandemic? The following chapter will try to answer this question and
highlight the countries of Norway and the Czech Republic in the discussions.
The resulting value of happiness presented in each report is the average of the three
previous years and the survey uses a 0-10 scale (0 – completely unhappy, 10 – completely
happy).

26
 4.2. Comparison and Evaluation of the Last Years Reports

The first report examined in the thesis is the World Happiness Report of 2018, which
was focused on both international (between countries and continents) and rural-urban (within
a country) migration. Speaking of international migration, immigrants seem to be less happy
than locals. However, happiness of an individual immigrant depends on several factors. It
definitely depends on the local happiness as well as on the happiness of the country he/she
comes from. If a person moves from a country with lower happiness to a country with higher
happiness, his/her perceived happiness will be still somehow lower than happiness of the
locals. However, the situation is different in the opposite case. If an migrant goes from a happier
country to a less happy country, his/her happiness will be higher than happiness of the local
people. Another important factor is how migrants are perceived, accepted and welcomed by
the local population (WHR, 2018).
The research of Polgreen and Simpson (2011) also contributes to this discussion who
also studied the relationship between happiness and migration. There is a phenomenon
occurring in happier countries - increasing immigration on one hand and increasing emigration
on the other. Immigrants are obviously moving to a country to search for a better and happier
life. But why is emigration growing associated with a country’s happiness? One would expect
emigration to decline as happiness increases. The explanation offered by the authors offer is
that people living in a happy country are more optimistic in general. They just want to take
advantage of opportunities elsewhere.
We can see progression of happiness and number of emigrants in the countries of the
Czech Republic and Norway. The data available are from 2013 to 2019, with the exception of
2014. According to the reports, happiness is constantly growing in the Czech Republic, while it
is the opposite in Norway and happiness of the Norwegian population is declining. Although
Norway’s happiness is decreasing, it is still of higher value than in the Czech Republic. In general,
we can say that Norway is happier than the Czech Republic. If we recalculate the total number
of emigrants per capita in the individual countries, we find that there are more people
emigrating from Norway than the Czech Republic. Basically, even without any calculation, the
same conclusion can be reached, as Norway has about half the population of the Czech
Republic. In this respect, we can agree with the results of the study of Polgreen and Simpson
(2011).

27
 Table 1: Emigration and happiness in numbers1

Year CZ - emigration CZ - happiness NO - emigration NO – happiness

2013 30 876 6.290 35 716 7.655

2015 18 945 6.505 37 474 7.522

2016 17 439 6.596 40 724 7.498

2017 17 684 6.609 36 843 7.537

2018 19 519 6.711 34 382 7.594

2019 21 301 6.852 26 826 7.554

Source: WHR, Czech Statistical Office, Statistics Norway, own figure processing

Figure 5: Happiness of the Czech Republic and Norway in 2013 – 2019

0
2013 2015 2016 2017 2018 2019

Norway Czech Republic

Source: WHR 2018, Czech Statistical Office, Statistics Norway, Excel, own figure processing

1
CZ = Czech Republic, NO = Norway

28
 Figure 6: Percentage of people emigrating from the Czech Republic and Norway

0,900

0,800

0,700

0,600

0,500

0,400

0,300

0,200

0,100

0,000
2013 2015 2016 2017 2018 2019
Czech Republic Norway

Source: WHR, Czech Statistical Office, Statistics Norway, Excel, own figure processing

However, when we focus on comparison within the individual countries, we cannot

completely agree with the statement of the mentioned study. One could expect growing
emigration with growing happiness in the Czech Republic. Similarly, a decline in happiness in
Norway should reduce emigration from the country. Unfortunately, we cannot observe these
patterns within the data, but we do see another pattern. The emigration curve of the Czech
Republic is U-shaped, while the emigration curve of Norway has the shape of an inverted letter
U.
Speaking of this topic, it is also necessary to mention immigration. In this context, it is
important to introduce the Migrant Acceptance Index, which shows how warmly migrants are
welcomed in different countries. Among the least-accepting countries, there are mostly East
and Southeast European countries including the Czech Republic, Slovakia, Russia, Montenegro,
Serbia or Macedonia. On the contrary, the most-accepting countries are located in Oceania and
Western Europe including Norway, Iceland, Sweden, New Zealand or Australia (Fleming,
Esipova, Pugliese, Ray & Srinivasan, 2018). Contact hypothesis by Allport, Clark and Pettigrew

29
(1954) says that interpersonal and direct contact with migrants or minority groups in general
helps to reduce stereotyping and prejudice. When focusing on the countries of our interest –
Norway and the Czech Republic – we can confirm these patterns. The percentage of Norwegian
population knowing an immigrant is 83.5%, while the percentage of Czech population knowing
an immigrant is much lower, only 24% (Fleming et al., 2018).
Why does the Czech Republic belong to the group of the least-accepting countries? The
Czech Republic is one of the countries which have been controlled by Germany and Russia for
much of the 20th century. They left unfortunate memories in the Czechs, which were etched
into the mentality of the people very deeply and so they are simply afraid of the foreign and
unknown things. This experience reduced their self-confidence and formed a society which is
lacking pride. Another influence could be represented by the Czech mass media, which play a
big role in the Czech society and affect a public opinion. Foreigners are often presented as a
“problem sector” and therefore they could be perceived rather negatively. In connection with
this, there is still a lack of English knowledge and therefore most Czechs rely only on home
sources of information.
When working with data and examining correlation between individual variables, it is
appropriate to also work with control variables, which are able to capture certain circumstances
that could affect this correlation. Therefore, it is important to mention that there are certainly
many other factors influencing the relationship between happiness and immigration or
emigration, and it is advisable to look at the results with caution. The problem related to
causality could also occur in this case. Does higher happiness mean higher emigration? Or is it
rather higher emigration bringing higher happiness to the country of origin? As explained a few
lines above, people coming from happier countries are more optimistic and open to new
opportunities and possibilities. However, we could also look at the problem from the opposite
side, where these new opportunities and possibilities bring happiness to the home country in
the form of new knowledge, thoughts and ideas.

The central theme of the 2019 report is happiness and politics. According to the report,
happier people are more likely to be engaged in politics. Interest in politics grows with
happiness but only up to a certain point. When this point is reached, the curve flattens. Can
happiness and life satisfaction be in any way connected with populisms and be the result of the
election of Donald Trump in the United Sates or Brexit in the United Kingdom? The study’s

30
answer is yes. They found a close association between populisms and unhappy life. People
feeling less happy and less satisfied with their lives were more likely to vote for leaving the
European Union (WHR 2019).
What about the correlation between happiness and voting in the United States
presidential elections? Many studies are trying to explain the success of Donald Trump in the
2016 election and one of them is the study of Ward et al. (2020) which proved a negative
relationship between subjective well-being and non-incumbent and populist voting. People
with a high level of subjective well-being are mostly satisfied with the current political situation
and have no needs to change it while people with lower subjective well-being have needs for
change. Populists speak to these groups of unhappy people and promise them radical changes
using strong words and emotions. The study also showed that lower individual happiness is
associated with higher probability of voting for Donald Trump.
Referring Brexit, the 2019 World Happiness Report (WHR 2019) presents a strong
significant negative relationship between life satisfaction and leave vote. People who were less
satisfied with their lives in general had 2.5 times higher probability to vote to leave the
European Union. Following this, we could discuss the reverse situation in Norway, which has
twice considered entering the European Union (formerly European Communities). The
referendum took place in 1972 and 1994, and in both cases, the majority of the population
voted against joining the European Union (European Communities in 1972). As might be
expected, the majority of no voters came from farming and fishing municipalities, while most
of the yes voters were from the capital and central municipalities (WHR 2020). People living in
rural places were more likely to vote for non-accession to the European Union to protect their
own livelihood (SSB, 1995). Most of the people were satisfied with their lives and situation at
that time, so they did not have needs to change anything and therefore refused joining the
European Union.
Donating, helping or volunteering is another topic being discussed in the World
Happiness Report of 2019. Why do these activities make us happy? There are a few reasons
behind it. Freedom of choice is one of them, so people can simply choose whether to help or
not. The authors mention cases where people forced to contribute felt less happy than those
who decided to do so themselves. Another strong factor is social connection. Spending money
on others is associated with higher happiness of the provider. Contributors can also see the
change that their contribution made or supported. People’s self-interest can play some role in

31
this context as well, for instance in the concept of warm-glow giving (WHR, 2019). When
donating some money, people do not have to necessary follow altruism. They are more focused
on selfish interest and social prestige and it could be something similar to a selfish own reward
for a donation (Andreoni, 1990).
Donating in Norway is quite high (WHR, 2019). Percentage of respondents within the
country who reported donating money to a charity in the past month was 60.3%, and it belongs
to the top 12 countries out of 134. Data for the Czech Republic was not available. However, we
can compare the data with a country economically, historically and geographically similar to
the Czech Republic, which is Slovakia. The percentage of Slovak respondents donating money
was 29.5%. When comparing happiness in the year of 2019, Norway reported 7.554 points of
happiness, while Slovakian happiness was lower – 6.198 points.
One of the last chapters deals with the relationship of social media or the online world
in general, and happiness. Longer time spent online is associated with reduced happiness.
During the period when digital media consumption was growing, social interaction in real life
was going the opposite direction. Among other activities, which has lost the attractiveness for
people, are reading, attending religious services or sleeping. Nevertheless, authors mention
also reverse causation when unhappy people are more likely to spend more time in the online
space (WHR, 2019). Digital media encourage comparison with others, cyberbullying or sleep
displacement. All these patterns can be observed mainly within the generation known as iGen,
which is a generation born since 1995 with a smartphone in the hand. However, some of the
studies show that the relationship between digital media and well-being is not linear. Non-users
are less happy than light users (0.5-2 hours per day spent on digital media). For users spending
more than 2 hours in the online world, the happiness curve decreases with the increasing
number of hours (Twenge, 2019).
The statement mentioned at the end of the section on WHR for 2018 also applies in this
part. It is appropriate to point out that the relationship between happiness and politics,
donation or social media is undoubtedly affected by many other circumstances and factors.
Mentioning social media, we could also observe problems with causation. It can certainly be
said that unhappy people spend more time on social media, or vice versa, people who spend a
lot of time online are less happy as a result of overusing. Unhappy people may perceive social
platforms as the most valuable means of their interest. On the contrary, heavy users may feel
unhappy due to some failure, failure to meet their own expectations, insufficient appreciation

32
and admiration from others. The problem of causality could also arise in the case of the
relationship between politics and happiness. Happy people are more involved in politics or
engaging in politics itself is that what bring happiness? As mentioned above, interest in politics
grows together with happiness. However, it might be that interest in politics makes people
happier. People better understand the society around them and they can influence its further
development.

The 2020 world happiness report is mainly focused on social, urban and the natural
environment. More than half of the world’s population lives in urban areas and this figure is
expected to grow even further. Simultaneously, 80% of the world’s GDP is produced within
these urban areas. In general, people living in urban areas showed higher points of life
satisfaction than those living in rural areas. The report also contains ranking happiness of cities
around the world based on the Gallup World Poll covering 186 cities from all over the world.
The top ten happiest cities could be seen in table 2. There are six Scandinavian cities among
them, including two cities from Norway – Bergen and Oslo. Prague, the Czech Republic took
the 44th place in this ranking (6.620). On the contrary, among the least happy cities are Kabul,
Afghanistan (3.236); Sanaa, Yemen (3.337) or Gaza, Palestine (3.485). We can observe certain
common features in the countries at the bottom of the list, such as war, political conflicts,
nature catastrophe, political instability or danger. Comparing happiness between cities and the
countries themselves is also very interesting. The study suggests that there are not any
systematic differences in happiness inequality when comparing happiness in the cities and
countries and the scatterplot is evenly distributed around the 45-degree line. This statement
can be verified in the table 2.

33
 Table 2: Top 10 happiest cities
Subjective Well-Being of Subjective Well-Being of
City, Country
the City the Country

Helsinki, Finland 7.828 7.809

Aarhus, Denmark 7.625 7.646

Wellington, New Zealand 7.553 7.300

Zurich, Switzerland 7.541 7.560

Copenhagen, Denmark 7.530 7.646

Bergen, Norway 7.527 7.488

Oslo, Norway 7.464 7.488

Tel Aviv, Israel 7.461 7.129

Stockholm, Sweden 7.373 7.353

Brisbane, Australia 7.337 7.223

Source: WHR 2020, own figure processing

SWB (Subjective well-being) of Bergen (7.527) is higher than the SWB of the whole
country (7.488), while SWB of Oslo (7.464) is lower than the nationwide happiness of the
country (7.488). When looking at the numbers of the Czech Republic, the happiness in Prague
reaches 6.620 points, while the average happiness of the whole country is 6.911. Ellis Delken
(2008) researched happiness in German cities, and she came up with an interesting result. After
the fall of the Berlin Wall in 1989, many Germans began to move from east to west, causing
cities to grow on one hand and shrink on the other. It does not really matter, whether the city
is growing, stable or shrinking. What matters is the location, meaning East-Germany or West-
Germany. People living in the West are more satisfied with their lives than their eastern
counterparts. I could try to reflect this thought within the European capital cities divided
according to the Iron Curtain. Countries belonging to the east of the then Iron Curtain were
Poland, East Germany, the Czech Republic, Slovakia, Hungary, Romania, Bulgaria, Albania, USSR
(namely Russia, Belarus, Latvia, Ukraine, Estonia, Moldova, Armenia, Azerbaijan, Georgia,
Uzbekistan, Kyrgyzstan, Tajikistan, Lithuania, Turkmenistan and Kazakhstan), Slovenia, Croatia,
Bosnia and Herzegovina, Montenegro, Macedonia and Serbia. West countries included

34
 Norway, Sweden, Finland, United Kingdom, Ireland, Denmark, the Netherlands, Belgium,
Liechtenstein, Luxembourg, West Germany, Austria, Switzerland, Italy, Greece, France, Spain,
Portugal, Iceland (Kochetkova, 2020). However, data was only available for the cities (countries)
marked in the figure 7, where the blue colour represents Western Europe and the orange
colour indicates Eastern Europe.

Figure 7: Subjective Well-Being of the European Capitals

9
8
7
Subjective Well-Being

6
5
4
3
2
1
0
Helsinki (Finland)
Copenhagen (Denmark)

Stockholm (Sweden)
Reykjavik (Iceland)
Dublin (Ireland)
Vienna (Austria)
Brussels (Belgium)

Prague (Czech Republic)

Madrid (Spain)

Ljubljana (Slovenia)
Riga (Latvia)
Vilnius (Lithuania)
Belgrade (Serbia)

Bucharest (Romania)
Chisinau (Moldova)
Sarajevo (Bosnia and Herzegovina)
Minsk (Belarus)
Tallinn (Estonia)
Lisbon (Portugal)
Budapest (Hungary)
Sofia (Bulgaria)
Zagreb (Croatia)
Athens (Greece)
Skopje (Macedonia)
Tirana (Albania)
Kiev (Ukraine)
Oslo (Norway)

Paris (France)

Bratislava (Slovakia)

Moscow (Russia)

City (Country)

Source: WHR 2020, Excel, own figure processing

The pattern is very similar to the finding of Delken (2008), where cities in the western
part seem to be happier than those on the east. There are two exceptions – Prague, the Czech
Republic and Lisbon, Portugal. Nevertheless, cities located in the west are generally happier

35
and show higher subjective well-being than the cities of Eastern Europe. The reason, why West
German cities are happier than East German cities, is the fact that people living in the west are
more concerned about the economic situation, job security and crime (Delken, 2008).
Although larger cities are perceived to be seen as attractive places to live in terms of
higher standard of living, economic, work and other opportunities, the curve of the
dependence of subjective well-being and economic development is not linear. This is described
as the so-called the urban paradox, where we can notice certain differences when comparing
subjective well-being of larger and smaller cities (see figure 8). In phase A, subjective well-being
and economic development of big cities reach higher values than smaller towns. However, the
curves showing the well-being of large and small cities intersect at some point and phase B
occurs. In this phase, well-being of larger cities decreases, while well-being of small towns
slightly grows. This could be explained by higher costs of living for less-educated people, which
still forms the majority (WHR, 2020).

Figure 8: The Urban Paradox

Source: WHR 2020

The World Happiness Report of 2021 is unsurprisingly linked to Covid-19 and life under
the pandemic. Many of us will remember 2020 as the grey, strange and sad year. More than 2

36
million people lost their lives and many more struggled with economic, existential, physical and
mental problems. Even though the pandemic has affected our lives, there has not been
registered any significant changes in the happiness ranking when comparing with the previous
year. However, we can observe some similarities between the pandemic development and life
satisfaction on the model of the United Kingdom, where the life satisfaction curve inversely
copies the pandemic development curve. At the beginning of the pandemic, the satisfaction
curve gradually decreased as the infection increased. During the summer of 2020, the situation
calmed down, people were happier and the pandemic seemed to be under control. The
infection curve dropped, while the satisfaction curve increased. In the autumn, another wave
came and people’s satisfaction began to decline again. In December, along with the arrival and
hope of the vaccine, people felt happier (WHR, 2021).
Bhatia and Mohsin (2020) refer to this time as the so-called VUCA world, meaning
volatile, uncertain, complex and ambiguous. The study examines happiness and satisfaction of
teachers in higher educational teachers in Delhi, India, who had to deal with many new
situations and ways of teaching. As can be expected, the study showed that the overall
happiness of teachers decreased during the pandemic due to many different reasons. Not all
teachers and students own all the technical equipment that allows online connection. Teachers
did not have enough time to prepare for the transition from the offline to the online world, and
they had to improvise a lot. Student engagement was a problem too.
Trust in government, social and public institutions was shown to be one of the most
important factors linking happiness and Covid-19. Countries with higher trust have been able
to cope with coronavirus much better, as well as maintaining their perceived happiness at a
higher level (WHR, 2021). Looking at the countries of our interest, Norway and the Czech
Republic, we can see the confirmation of the above statement. According to the OECD database
(OECD, 2020), trust in government in Norway is 82.9% while it is only 31.9% in the Czech
Republic. And how did these countries dealt with coronavirus and how happy they felt? In the
Czech Republic, there were 155 251 total cases per one million of population and 2 820 deaths
per one million of population. Norway reached much better numbers - 23 527 total cases per
one million of population and 144 deaths per one million of population. In addition, Norwegians
seemed to be happier and more satisfied than the Czechs. While the Norwegians reported
happiness at the level of 7.392 points, Czechs were happy about 6.965 points (WHR, 2021).

37
 Social connection and well-being during the pandemic was another challenge that we
had to deal with. However, there were few characteristics protecting positive well-being.
Personality is one of them. Although it might seem that introverts are the ones who cope better
with the pandemic and no-social-contact policy, this is not the case in the long run. Social ties
and connections also played an important role. Greater social connections are associated with
higher well-being during the pandemic. Speaking of digital media, those involving voice
messages, brings higher satisfaction than those without. However, social media usage is still
associated with lower well-being. Not a big surprise that a physical activity also brings higher
well-being (WHR, 2021).

In the following paragraphs, we will take a closer look at the comparison of happiness
in 2018-2021. As we can see in table 3, the Nordic countries have traditionally been at the
forefront. In particular, Finland, where the happiness has been constantly growing. However,
Norway has been following the opposite pattern, where the perceived happiness of the
population has been decreasing over the last years. From the second place in 2018, over time,
it fell to third, fifth and sixth place, which was reached in 2021. Denmark has held its position
for the last 3 years, as have Iceland and Sweden. The Nordic countries are followed by the
Netherlands, Luxembourg, New Zealand, Canada and Austria. However, if we look at the
bottom of the scale, we find out that there are mostly countries with a low level of
development, such as Afghanistan, Zimbabwe, Rwanda, Lesotho, Malawi or Burundi (WHR
2018, WHR 2019, WHR 2020, WHR 2021).
What makes certain states happier than others? According to John Helliwell, the
happiness of a country depends mainly on 4 factors – high perceived trust towards each other,
trustworthiness of government and the community involvement. All of these factors are very
high in the Scandinavian countries listed on the top (Layard, 2007). Other studies also mention
the impact of corruption in the country on the satisfaction and happiness of the population
(WHR, 2020). The Corruption Perceptions Index (CPI) is an index trying to measure corruption
in individual countries. In 2020, countries such as Denmark (1st place – the lowest level
corruption in the world), Finland (3rd place), Sweden (5th place), Norway (7th place) or Iceland
(18th place) were among the countries with the lowest levels of corruption in the world. On the
contrary, countries such as South Sudan (180th place), Syria (178th place), Yemen (177th place)
or Afghanistan (165th place) belong to the group of countries with the highest level of

38
corruption in the world. One of the other possible reasons why the Nordic countries have
traditionally been in the first place are generous welfare benefits and the protection of
employees in the labour market (WHR, 2020).
In this context, we could also discuss the Easterlin paradox. Richard Easterlin pointed to
a strong relationship between the income of a given country and happiness of its inhabitants.
However, this positive income effect only applied to countries with lower level of GDP. Once
GDP reaches a certain level, the happiness and satisfaction of the population gains a constant
or negative values. Easterlin called this point as “saturation point”, meaning if this point is
reached, a further increase in GDP will not lead to an increase in the happiness of population
(Stevenson and Wolfers, 2008). Within this framework, the Nordic countries tend to refute the
Easterlin paradox. According to the data of the World Bank, Nordic countries such as Finland,
Denmark, Iceland, Norway and Sweden are among the countries with the higher GDP per
capita, while countries such as Burundi, Malawi, Afghanistan or Rwanda are among the bottom
ones of the ladder.

39
 Table 3: Top 10 countries2

WHR 2018 WHR 2019 WHR 2020 WHR 2021

Finland 7.632 Finland 7.769 Finland 7.809 Finland 7.842

Norway 7.594 Denmark 7.600 Denmark 7.646 Denmark 7.620

Denmark 7.555 Norway 7.554 Switzerland 7.560 Switzerland 7.571

Iceland 7.495 Iceland 7.494 Iceland 7.504 Iceland 7.554

Switzerland 7.487 Netherlands 7.488 Norway 7.488 Netherlands 7.464

Netherlands 7.441 Switzerland 7.480 Netherlands 7.449 Norway 7.392

Canada 7.328 Sweden 7.343 Sweden 7.353 Sweden 7.363

NZ 7.324 NZ 7.307 NZ 7.300 Luxembourg 7.324

Sweden 7.314 Canada 7.278 Austria 7.294 NZ 7.277

Australia 7.272 Austria 7.246 Luxembourg 7.238 Austria 7.268

Source: WHR 2018, WHR 2019, WHR 2020, WHR 2021, own figure processing

2
NZ = New Zealand

40
 Table 4: Bottom 10 countries3

WHR 2018 WHR 2019 WHR 2020 WHR 2021

Burundi 2.905 SS 2.853 Afghanistan 2.567 Afghanistan 2.523

CAR 3.083 CAR 3.083 SS 2.817 Zimbabwe 3.145

SS 3.254 Afghanistan 3.203 Zimbabwe 3.299 Rwanda 3.415

Tanzania 3.303 Tanzania 3.231 Rwanda 3.312 Botswana 3.467

Yemen 3.355 Rwanda 3.334 CAR 3.476 Lesotho 3.512

Rwanda 3.408 Yemen 3.380 Tanzania 3.476 Malawi 3.600

Syria 3.462 Malawi 3.410 Botswana 3.479 Haiti 3.615

Liberia 3.495 Syria 3.462 Yemen 3.527 Tanzania 3.623

Haiti 3.582 Botswana 3.488 Malawi 3.538 Yemen 3.658

Malawi 3.587 Haiti 3.597 India 3.573 Burundi 3.775

Source: WHR 2018, WHR 2019, WHR 2020, WHR 2021, own figure processing

3
SS = South Sudan, CAR = Central African Republic

41
 5. Survey

The survey aims to either confirm or rebut claims of the happiness literature on a
sample of people from the Czech Republic and shows whether income, age, job, health or
safety affect our well-being. I implemented the online questionnaire survey in the Uherské
Hradiště district, Czech Republic, and I managed to gain answers from 157 working respondents
with age ranging from 20 to 61 with a mean of 36.78 years. The respondents were asked
following questions:
1. How satisfied (happy) are you about your life as a whole on the 1-10 scale (1–completely
dissatisfied, 10–completely satisfied)?
2. What is your gross income per month?
3. What is your age?
4. How satisfied (happy) are you about your job on the 1-10 scale (1–completely
dissatisfied, 10–completely satisfied)?
5. How healthy you feel on the 1-10 scale (1–completely dissatisfied, 10–completely
satisfied)?
6. How safe do you feel in the environment you live in on the 1-10 scale ((1–completely
unsafe, 10–completely safe)?

Using the least squares method, a regression model with one endogenous variable and
five exogenous variables is constructed. Subsequently, economic, econometric and statistical
verification and discussion of the model results are performed.

5.1. Data

Cross-sectional data collected within the questionnaire survey are used to compile the
model. The data were collected as part of an online survey and are from January 2021. There
are no data missing so the data set is complete.

42
 5.1.1. Variables

Linear regression model contains of one endogenous (dependent) variable and five
exogenous (independent) variables.

Endogenous variable

The endogenous or dependent variable is life satisfaction (life_satisfaction). Life

satisfaction or happiness is measured by life satisfaction points, which evaluate life as a whole
on the 1-10 scale (1–completely dissatisfied, 10–completely satisfied). The respondents were
asked how satisfied (happy) they were with their lives on the 1-10 scale. The higher the value
of life satisfaction, the more satisfied and happy the person is.

Exogenous variables

The exogenous or independent variables are gross income per month (gross_income),
age (age), job satisfaction (job), self-reported health (health), individual safety feeling (safety).
Section 5.3.1 discusses possible problems with exogenous variables.

Gross income per month (gross_income) is defined as individual’s income before taxes
and other deductions per month. The survey measures gross income per month in the Czech
currency of Czech koruna (CZK).

Age (age) is the second independent variable and it is measured in years.

Job satisfaction (job) refers to a question how happy people are or feel about their job
and how satisfied are they working there on the 1-10 scale (1–completely dissatisfied, 10–
completely satisfied)? Job satisfaction could be defined as a pleasurable emotional state
resulting from a valuation of one’s job.

43
 Self-reported health (health) evaluates an individual’s health. How satisfied or happy do
they feel about their health or how healthy do they feel on the 1-10 scale. The higher the value,
the healthier the person feels. This variable does not necessarily point to people’s true health.

The rate of subjective feeling of security (safety) is based on the question: “How safe
you feel about the environment you live in on the 1-10 scale?” Similar to the previous variables
– the higher the value, the safer one feels.

5.1.2. Descriptive Statistics

Table 5 presents descriptive statistics of all variables occurring in the regression analysis.
The total set contains 942 pieces of data obtained from the questionnaire survey, which was
realised in January 2021 in the Uherské Hradiště district, Czech Republic.

Table 5: Descriptive statistics

expected standard
median minimum maximum
value deviation

life_satisfaction 7.90 8.00 4.00 10.00 1.34

gross_income 33 372 CZK 28 000 CZK 3 000 CZK 110 000 CZK 19 401 CZK

age 36.78 34.00 20.00 61.00 11.72

job 7.48 8.00 1.00 10.00 1.89

health 7.81 8.00 3.00 10.00 1.68

safety 8.71 9.00 5.00 10.00 1.36

Source: Excel, own figure processing

While some variables show very low variability, other variables, such as gross income
per month, show large differences. The average life satisfaction of all respondents is 7.90. The

44
World Happiness Report 2020 rank countries according to their life satisfaction and happiness.
Comparing to the report, I found a higher number in my survey. According to the World
Happiness Report 2020, the Czech Republic was happy about 6.91 life satisfaction points
whereas Norway was happy about 7.49 life satisfaction points. The average gross income per
month of the respondents was 33 372 CZK which is slightly lower than the average month salary
in the Czech Republic. Gross wage in the Czech Republic was 35 402 CZK per month in the third
quarter of 2020 (Czech Statistical Office).
According to the survey, only 1% of the respondents reported the lowest measured life
satisfaction which was about 4 satisfaction points. On the contrary, life satisfaction of 10 points
was found in 10% of respondent’s answers. The largest share of respondents (37%) admitted
their life satisfaction to be of 8 points.
In the figure 9, we can see the distribution of life satisfaction points among the
respondents.

Figure 9: Distribution of Life Satisfaction Points4

LF of 10 LF of 4 LF of 5
10% 1% 8%
LF of 6
5%

LF of 9 LF of 7
22% 17%

LF of 8
37%
Source: Excel, own figure processing

4
LF = life satisfaction

45
 The largest share of the respondents (40%) earn in the range of 20 001 CZK – 30 000
CZK. Only 4% of the respondents receive less than 10 001 CZK per month, while the salary of
13% of the interviewed people is more than 50 000 CZK. Complete income distribution can be
found in the figure 10.

Figure 10: Distribution of Gross Incomes

> 50 000 CZK 0 - 10 000 CZK

13% 4%

10 001 - 20 000 CZK

40 001 - 50 000 CZK 17%
8%

30 001 - 40 000
CZK
18%

20 001 - 30 000
CZK
40%
Source: Excel, own figure processing

46
 Almost half of the respondents (45%) is in the age group of 20-30 years. The least
numerous age group consists of people aged 31 – 40 years, who make up only 13% of the total.
28% of the respondents are in the age of 41 – 50 years. Complete age distribution can be seen
in the figure 11.

Figure 11: Age Distribution of the Respondents

> 50 years
14%

20 - 30 years
45%

41 - 50 years
28%

31 - 40 years
13%
Source: Excel, own figure processing

47
 Overall, the respondents were quite happy about their jobs. 55% of the people admitted
8 or higher job satisfaction points. We can find distribution of job satisfaction points in the
figure 12.

Figure 12: Distribution of the Job Satisfaction Points5

JS of 10 JS of 1 JS of 3 JS of 4
13% 1% 3% 2%
JS of 5
10%

JS of 6
JS of 9 12%
21%

JS of 7
17%

JS of 8
21%
Source: Excel, own figure processing

5
JS = job satisfaction

48
 The respondents seem to feel quite healthy. 81% of them evaluated their own health
by point 7 or higher. Only 19% of the respondents admitted health feeling lower than 7. The
distribution of self-reported health points could be found in the figure 13.

Figure 13: Distribution of Self-Reported Health Points6

SH of 10 SH of 3 SH of 4
13% 1% 5% SH of 5
5%

SH of 6
8%

SH of 9 SH of 7
29% 18%

SH of 8
21%
Source: Excel, own figure processing

6
SH = self-reported health

49
 Safety is the last examined variable. In general, people feel safe within the district they
live in. 84% of the respondents feel secure about 8 or more points. Distribution of safety points
could be found in the figure 14.

Figure 14: Distribution of Safety Points

Safety of 5
5% Safety of 6
2%
Safety of 7
9%

Safety of 10
37%

Safety of 8
22%

Safety of 9
25%
Source: Excel, own figure processing

5.2. Theoretical Model

The model is formed from one endogenous and five exogenous variables. It aims to
explain life satisfaction by the determinants of gross income, age, job satisfaction, self-reported
health and subjective feeling of safety.
First of all, I will be focused on the determinant of income. The study of Richard Easterlin
(1974) found out that there is no evidence that real income growth has any effect on happiness
level. In other words, he claimed that people could increase their happiness by taking care of
their families and health, not by earning money. Easterlin also proves that happiness level

50
grows with increasing income only to a certain point. In the regression model, I would like to
prove that money and high income do not make us happy. Because of the study of R. Easterlin
(1974) and my personal perspective, I will not expect any correlation between life satisfaction
and gross income in the model.
Age is another independent variable. Tiefenbach and Kohlbacher (2013) say that there
is some relationship between age and happiness. However, the curve representing this
dependency is U-shaped. The happiest people are those who are “younger” which means less
than 25 years old, and “older” who are more than 70 years old. The same result was confirmed
also by a study of Vera-Villarroel et al. (2012). One possible way to verify the U-shaped curve
could be polynomial regression. On this basis, it would be possible to determine the
relationship between age and happiness and to confirm or refute the studies of the above-
mentioned authors. As the examination of the U-shaped curve is beyond the scope of my thesis,
I will take this statement as given and therefore, I do not expect any statistical significance.
The other variable is job satisfaction and working environment. There are some studies
which significantly proved the relationship between job satisfaction and subjective well-being
(Eschleman and Wang, 2010). The same result was confirmed by a survey of Olsson at al.
(2013). They claimed that job satisfaction has a positive influence on happiness in general. Thus,
I expect a positive correlation between life satisfaction and job satisfaction.
Considering health, it has been claimed as one of the most important determinants of
happiness (Majumdar & Gupta, 2015) and it influences happiness in a positive way. Therefore,
the hypothesis is based on the expectation of positive relationship between health and life
satisfaction.
The last variable is safety. The study of Cheng and Smyth (2015) confirms that living in
a safe neighbourhood has a positive impact on happiness. They also found out that being a
victim of a crime reduces the overall happiness. Based on this statement, the positive
relationship between safety and life satisfaction is assumed.

51
 5.3. Regression Model

The least squares method was used to verify the hypotheses and the following model
was constructed:
life_satisfactioni = β0 + β1 gross_incomei + β2 agei + β3 jobi + β4 safetyi + β5 healthi + ui

where life_satisfactioni is a dependent variable that is estimated by using parameters. β0 is a

constant and β1, β2, β3, β4, β5 represent the regression coefficients of variables (parameters).
An individual person is expressed by subscript i (i = 1, 2, …, 157) and ui is a random variable.
The model is working with the data of 157 individuals. The coefficients were estimated
in the EViews software programme and the results are interpreted in the next chapter.
The variable life_satisfaction is the dependent variable of life satisfaction and
happiness. The independent variables such as gross_income explaining gross income of a
person per month, age expressing how old an individual is, job is satisfaction at work, health is
showing how a person feels about his/her health and safety is measuring an individual’s feeling
about his/her safety.

5.3.1. Problems with causality

While working with data, there are always some objections that need to be elaborated
and explained. Happiness and life satisfaction are indicators subjectively biased as well as self-
reported health, job satisfaction and safety. Subjectivity can be influenced by many factors such
as personality traits, where one can feel happy by a small amount, while the other one needs a
lot more to be happy. Respondents may also feel that they do not meet the expectations of
his/her loved ones and thus, incorrectly answer questions about life satisfaction, work
environment, health and safety, and this might lead to subjectivity of all these values.
However, these variables have one thing in common, a threat of them being
endogenous, which would affect both the other variables as well as the dependent variable
itself and that could cause a problem of reversed causality.
When asking the respondents about life satisfaction, job satisfaction, self-reported
health or how safe do they feel, the answers could be distorted because of comparisons. The

52
respondents compare themselves with lives before and now. In this context, it is appropriate
to mention the current situation of Covid-19 pandemic and people can be significantly affected
by that when answering questions about satisfaction overall. At the time when I was conducting
the questionnaire, there were different lockdown measures implemented.
The variables were properly evaluated during the construction of the regression model.
As I will touch upon on later in the discussion section, all the variables were chosen because of
particular reasons. I am aware that regression may not be correct, but it is valid within the
boundaries of my framework. There could be a possible problem of correlation between the
dependent and some of the independent variables, but I consider it to be something beyond
my master’s thesis. Nevertheless, I will try to describe the measurement problems, possible
correlations between certain variables and suggestions that could contribute to improvement.

53
 6. Results Interpretation and Discussion

Table 6: Estimated model

Dependent Variable: LIFE_SATISFACTION

Method: Least Squares
Included observations: 157

Variable Coefficient Std. Error t-Statistic Prob.

C 4.674276 0.813792 5.743819 0.0000
GROSS_INCOME -5.50E-06 5.31E-06 -1.036567 0.3016
AGE 0.012552 0.008581 1.462743 0.1456
JOB 0.171683 0.057863 2.967084 0.0035
HEALTH 0.240478 0.0063436 3.790866 0.0002
SAFETY -0.024784 0.0777190 -0.321083 0.7486
R-squared 0.175407 Mean dependent var 7.898089
Adjusted R-squared 0.148102 S.D. dependent var 1.340612
S.E. of regression 1.237362 Akaike info criterion 3.301308
Sum squared resid 231.1908 Schwarz criterion 3.418107
Log likelihood -253.1526 Hannah-Quinn criter. 3.348744
F-statistic 6.424111 Durbin-Watson stat 1.869757
Prob (F-statistic) 0.000019
Source: EViews, own figure processing

In order to interpret the model, it must satisfy Gauss-Markov assumptions. If these

assumptions are met, we can consider the estimates to be valid. There should be no
heteroskedasticity, multicollinearity and autocorrelation in the model. Since the model worked
with cross-sectional data, the autocorrelation test is not needed. However, heteroskedasticity
and multicollinearity tests are necessary.
First, multicollinearity is tested using the VIF test. If the values of the centered VIF are
less than 10, we can consider multicollinearity to be tolerable. As we can see in table 7, the

54
model meets these conditions since all the values are less than 10. The EViews VIF test’s output
could be found in the appendix 1.

Table 7: VIF test

Variance Inflation Factors
Included observations: 157
Variable Coefficient Variance Uncentered VIF Centered VIF
C 0.662258 67.90992 NA
GROSS_INCOME 2.82E-11 4.301464 1.086596
AGE 7.36E-05 11.25120 1.037708
JOB 0.003348 20.42871 1.231522
HEALTH 0.004024 26.33066 1.167684
SAFETY 0.005958 47.51654 1.128963
Source: EViews, own figure processing

Furthermore, the model was tested for heteroskedasticity and Breusch-Pagan-Godfrey

test was used. The data of the regression model have to be free from heteroskedasticity.
Otherwise, the data have to be homoskedastic. In this case, we look for Probability of Chi-
Square, the upper one. If the value is more than 0.05, it means that there is homoskedasticity.
As we can see in table 8 on the next page, the value of the model is 0.1071 which is more than
0.05 and thus, homoskedasticity was proven. The EViews Breusch-Pagan-Godfrey’s test could
be found in the appendix 2.

55
 Table 8: Heteroskedasticity Test
Heteroskedasticity Test: Breusch-Pagan-Godfrey
Null hypothesis: Homoskedasticity
F-statistic 1.847187 Prob. F (5,151) 0.1070
Obs*R-squared 9.049416 Prob. Chi-Square (5) 0.1071
Scaled explained SS 11.46010 Prob. Chi-Square (5) 0.0430
Dependent Variable: RESID^2
Method: Least Squares
Included observations: 157
Variable Coefficient Std. Error t-Statistic Prob.
C 2.922171 1.586277 1.842157 0.0674
GROSS_INCOME -1.94E-05 1.03E-05 -1.877160 0.0624
AGE 0.019660 0.016727 1.175326 0.2417
JOB -0.063649 0.112788 -0.564326 0.5734
HEALTH -0.134930 0.123652 -1.091207 0.2769
SAFETY 0.000556 0.150462 0.00369 0.9971
R-squared 0.057640 Mean dependent var 1.472553
Adjusted R-squared 0.026436 S.D. dependent var 2.444443
S.E. of regression 2.411917 Akaike info criterion 4.636188
Sum squared resid 878.4185 Schwarz criterion 4.752987
Log likelihood -357.9407 Hannan-Quinn criter. 4.683624
F-statistic 1.847187 Durbin-Watson stat 1.801418
Prob(F-statistic) 0.106978
Source: EViews, own figure processing

Since the model meets the Gauss-Markov assumptions, the estimates are valid and the
model can be interpreted.
Whether a variable is statistically significant or not is determined by the so-called p-
value. If the value is lower than 0.01, the variable is statistically significant at the 1% level of
significance. Similarly, if the value is lower than 0.05, the variable is statistically significant at
the 5% level of significance. The significance level is the probability of the study rejecting the
null-hypothesis, which was assumed to be true.

56
 There are only two variables statistically significant in the model – job and health (see
table 6). The job variable and the health variable are both statistically significant at the 1% level
of significance. The p-value of job is lower than 0.01 at 0.0035. If the job satisfaction increases
by one percentage point, life satisfaction will increase by 0.171683. Similarly, health’ s p-value
is 0.0002 which is also lower than 0.01 and it proves 1% level of significance. If the health
satisfaction increases by one percentage point, life satisfaction will increase by 0.240478. Both
variables affect life satisfaction in a positive way and the variable of health satisfaction seems
to be the strongest determinant of the model. As the p-values of gross income, age and safety
show, these variables are statistically insignificant in the model.
The EView’s output of the model could be found in the appendix 3.
Although income was found to be a very important predictor of life satisfaction which
affects the dependent variable positively (Frijters et al., 2004), the variable of gross income
seems to affect life satisfaction negatively in the model. In general, the results of a study by
Caporale at al. (2009) confirm the positive effect of income on life satisfaction with the
exception of Eastern European countries. However, I cannot confirm these results since the p-
value of gross income in the model is 0.3016 and thus, it cannot be described as a statistically
significant variable. The reason could be the Easterlin paradox which says that the level of
happiness grows only up to certain point and then it is flat (Easterlin, 1974).
The variable of age shows a positive influence on life satisfaction in the model, namely
0.012552. However, the p-value is 0.1345 which is too high to be a good prediction. As
mentioned above, the U-shaped curve express influence of age on life satisfaction (Tiefenbach
& Kohlbacher, 2013) and that might be the reason why there is no statistical significance of age.
The job satisfaction variable was chosen based on the causal analysis of Chacko (1983)
who claimed that job satisfaction has a positive influence on life satisfaction. The variable of
job was found as statistically significant at the 1% level of significance so we can agree with the
studies of Bowling, Eschleman and Wang (2010) and Olsson at al. (2013). However,
implementing job or work environment into the research is complicated. Regarding the variable
of job, it would be ideal to examine, for instance, unemployment because (un)employment
seems to be a very strong predictor of life satisfaction and it is also a variable that can be
measured objectively. Employed individuals show much higher values of life satisfaction
compared to unemployed counterparts (Winkelmann, 2014). Nevertheless, it was not possible
to involve this variable into the survey because all the respondents were actively working and

57
the main aim of the research was to find out whether income plays any role in the context of
happiness and life satisfaction. Also, the type of employment could be another determinant of
life satisfaction since self-employed people are in general more satisfied with life (Krause,
2014). This variable was also omitted due to shortage of self-employed individuals. As
mentioned previously, the survey was performed online, and so all the inhabitants of the
Uherské Hradiště district could have joined and so there was no guarantee of sufficient sample
of self-employed workers.
The fourth variable was subjective health feeling or self-reported health in other words.
Self-reported good health status is statistically correlated with higher life satisfaction as it was
proved by a study of Kööts and Realo (2015) and a study of Palmore and Luikart (1972). The
paper of Lukairt (1972) also presents the idea that a person with bad objective health may be
satisfied if he/she perceives his/her own health as good. Similarly, an individual with good
objective health may be dissatisfied with life if he/she believes that his/her health is poor. The
findings of Jovanović and Joshanloo (2019) claim that also satisfaction with healthcare is
associated with higher life satisfaction. Regarding to the health variable itself, self-reported
health was chosen as a variable measuring health since the private information about objective
health of the respondents would be difficult to gain. Also, measuring healthcare quality would
not make any sense since all the interviewed people were from the same district and thus,
subjective health valuation seemed to be the only possible variable capturing health in the
model. The above problems are the main reason why subjective health feeling (self-reported
health) was used as the variable of health.
Safety as the last variable of the model was found to be statistically insignificant in the
model since the p-value of 0. 9971 is too high and therefore this variable cannot be considered
as a significant predictor of life satisfaction. Obviously, it would be more relevant to examine
safety on the objective base such as safety of a country or safety in terms of crime victimization.
Due to the district based questionnaire, these variables were omitted and substituted by
subjective safety.

58
 7. Limitations of the Model and Recommendations for Further
Studies

The essential limitation of the estimated model is insufficient number of respondents.

It would have certainly been more appropriate to include more observations and respondents.
The more respondents are included in the research, the more accurate estimates are. Only 157
completed questionnaires out of 168 could have been used for processing predominantly due
to omitted answers about income and age.
Another possible problem is the fact that the research works with cross-sectional data
collected at the one period of time, which provide observations only from January 2021. There
could have been some circumstances affecting decisions of the respondents, such as situation
associated with the pandemic. The problem of cross-sectional data could have been solved by
using panel data, which was unfortunately not possible due to the lack of this type of data.
The determinants mentioned above, such as income, age, job satisfaction, health
satisfaction or safety are certainly not the only determinants affecting life satisfaction.
The endogenous variable of life satisfaction itself is also difficult to measure since it does
not have any fixed unit and it is based on subjective evaluation. Also, the variables such as job
satisfaction, health satisfaction and safety could face the same problem since the answers are
self-reported values and not any objective merit.
For further studies, I would recommend involving more variables, especially those,
which could be measured by some objective value, and more observations so the model could
be more accurate. There are some methods of addressing problems related to omitted variable
bias, such as checking for conditions that capture all the factors creating the problem. In case
of the job satisfaction variable, subjective feeling of satisfaction could be affected by some
external event such as strike, salary increase, etc., and thus may not capture long-term general
job satisfaction. The same can be applied to the variable of health satisfaction and safety. The
problem could be solved by variables that would control for all these possible cases, which is
often very difficult to find.
The subjectivity of both dependent and independent variables can also be an objection.
The dependent variable is based on the question: “How satisfied (happy) are you about your
life as a whole on the 1-10 scale (1-completely dissatisfied, 10-completely satisfied)?”, and it is
therefore possible that the answers are skewed by the current fluctuations of the respondents’

59
moods. One solution could be using two methods. The first method is to obtain information
about happiness and subsequent averaging. The other one could be Cantril’s Self-Anchoring
Ladder of Life Satisfaction, also known as Cantril Ladder (Levin & Currie, 2014). This method
requires the respondent to imagine the worst and best possible life and then answer the
question of satisfaction. He/she is not much affected by the current mood, but he/she concerns
more the overall situation.
Finally yet importantly, we may experience a problem of reverse causality, especially in
the relationship between the endogenous variable of life satisfaction and exogenous variables
of job satisfaction, self-reported health or subjective feeling of security. It might seem that job
satisfaction, health and safety make us happier and satisfy our needs for a joyful and
comfortable life. On the other hand, happier people can generally perceive their health, safety
and job better because they simply have a more optimistic and cheerful approach to life.

60
 8. Conclusion

The key to happiness has been sought by people all over the world, and the field of economics
is no exception. Thus, a branch of classical economics called the economics of happiness was
created and seeks to find determinants influencing our happiness, well-being and satisfaction.

The aim of the thesis was to find out what makes us happy. Is it money? Or is it a stable job and
family well-being? How can we measure the well-being itself and progress of society? Is there
a relationship between migration, populism, donation, social media or the pandemic, and
happiness? This thesis tried to answer such questions.

Firstly, the thesis introduced the measures that seek to capture the development of our society,
such as Gross Domestic Product, Human Development Index, Capability Approach, Better Life
Index, Happy Planet Index and Gross National Happiness. Above all, gross domestic product
appears to be an insufficient indicator because it omits social, environmental and personal
elements. However, each of the mentioned indexes exclude something in essence, and it is very
difficult or almost impossible to identify the perfect one including all the necessary
components.

Secondly, the thesis shifted to a presentation of the economics of happiness, its development
and individual determinants. The difference between happiness, well-being and life satisfaction
was also described, as well as the way we could measure happiness. The origin is dated back to
ancient Greece and names like Jeremy Bentham, Richard Easterlin or Tibor Scitovski are
considered to be especially important in this field. According to the literature, unemployment
and inflation have a negative impact on our happiness, while health, safety and good family
relationships affect our happiness in a positive way.

This was followed by a discussion of the world happiness reports from the years of 2018-2021.
The world happiness report of 2018 dealt with the topic of different types of migration.
According to the report, higher happiness could be associated with higher immigration because
people naturally are looking for a better life. However, higher values of happiness could be also
associated with higher emigration because people coming from a “happy country” are

61
optimistic and open to new opportunities. The thesis can only partially support these
statements as the curves of happiness and emigration within the countries of Norway and the
Czech Republic are not linear. The 2019 world happiness report was focused on politics,
populism, donation and social media. People with lower levels of happiness tend to vote and
support populists, because populists offer new solutions and changes, and promote the
interests of “ordinary” people. Speaking of social media, we could state that people with lower
level of happiness most likely spend more time by using social media. It might be that unhappy
people do not have any more rewarding things to do than spending much time on social media.
On the other hand, some authors refer to reverse causation and say that heavy users most
likely feel less happy. The reason behind could be comparing with others. Social media users
observe that they are less successful than others (measured by likes, comments or views) which
could make them feel less happy. Another report tried to explain the relationship between
social, urban and natural environment, and happiness, where an interesting finding was that
the inhabitants of the western world felt happier than the inhabitants of the eastern world. The
very last report was unsurprisingly linked to the pandemic. Although it was a difficult time for
all of us, there were no significant deviations in happiness registered. According to these
reports, Finland, Denmark and Switzerland are among the happiest countries in the world,
while Burundi and Yemen are the countries with lowest happiness. It should be also noted that
in any examination of a relationship between some variables, it is more than necessary to work
with the so-called control variables. Therefore, it is important to state that correlation between
happiness and migration, politics, social media or natural environment could be affected by
other circumstances and factors.

At the end of the thesis, an econometric model was constructed and it tried to estimate the
association between exogenous variables (gross income, age, job satisfaction, health
satisfaction and safety feeling) and endogenous variable (life satisfaction). The least squares
method and Eviews software were used. The model worked with data of 157 inhabitants from
the Uherské Hradiště district, Czech Republic, which were collected in January 2021. The
variables of gross income, age and safety feeling were showed as statistically insignificant, while
job satisfaction and health satisfaction can be declared as statistically significant. The reason
for the insignificance could be explained by the Easterlin’s paradox in case of gross income, and

62
U-shaped relationship between age and happiness in case of age variable. The insignificance of
the safety variable could be explained by a small sample of data.

I found that the main shortcomings are a small sample of respondents, cross-sectional data,
lack of other variables, and difficult measurability and bias of variables. Happiness and well-
being are affected not only by economic factors, but also by factors of a psychological and
sociological nature that are difficult to measure.

Finally, it has not been proved that money can buy happiness. We can agree that money makes
us happy only to a certain extent. The findings of my thesis have not weakened my belief that
people should stop chasing wealth. The things that make us really happy usually do not cost
anything.

63
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Appendix

Appendix 1: VIF test

Appendix 2: Breusch-Pagan-Godfrey test

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Appendix 3: The estimated model

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