Investigating the Determinants of Happiness Index in EU-27 Countries: A Guantile Regression Approach

Abstract

This paper examines the determinants of happiness index ratings in European countries over 8 time points using unique data from the Eurostat, World Bank and World Happiness Reports. To examine the determinants of happiness index ratings for EU-27 countries over the 2012-2019 period, panel ordinary least square (OLS) and quantile regression model are used to data obtained from all sample. Evidence from European data on happiness index generate some important key outcomes; economic outcomes levels with both current taxes and inflation rate have a positively relationship on happiness index ratings (HIR), while total employment rate has a significant negatively on HIR. Additionally, in a quantile panel regression of 27 countries, the impact of financial inclusion on happiness index looks to change with a country’s level of income. On the macroeconomic level, gross domestic product (GDP) improves the happiness index for the individual under certain conditions. Thus, GDP on 0.25th quantile levels positively significant impacts the HIR for leader countries. Overall, empirical evidence suggests that macro-economic variables and the labor market proxies of the countries play a key role in determining happiness index ratings as well.