Happiness over the financial crisis

This paper adds to the literature on the macroeconomic driving forces of happiness. Using data for 106 countries over the financial crisis (2006–2013), we estimate a dynamic panel data model. We find that there is a strong relation between income and happiness. Further, individuals have a stronger aversion against unemployment than against inflation. We perform various robustness checks including cultural differences and additional driving forces such as gender inequality and macroeconomic policies. Finally, we identify happiness shocks using the performance of ones’ country at the FIFA World Cups. We show that movements in happiness can generate business cycles. Interestingly, happiness shocks increase income on impact but decrease it after 1 year.