Econometric Analysis of Happiness Dec , 2004

What Creates Happiness? The economy and the economic policies of government are major concerns for people today. Upon reflection, however, many would agree that the ultimate goal in life should be happiness and satisfaction with life, rather than economic growth, high personal income or a colorful career itself. No doubt, income and consumption (which are what economists normally analyze as proxies of welfare) do contribute to human happiness, but there are probably additional factors. For example, it might be of interest to assess to what extent factors such as marital status, age, gender, educational background, unemployment and living in a big city could affect human happiness. To answer these questions, some economists have recently developed a new approach to human welfare. They elicit subjective well-being assessments from people by having them respond to questionnaire surveys and then estimate the determinants using econometric techniques. Here is an example question from one survey: “All things considered, have you recently been feeling reasonably happy? Here is a 0 to 10 scale. Think of 10 as very happy and 0 as very unhappy. How would you say you feel these days, using this ten-point scale?” Ohtake and Tomioka (2004) analyze the reported happiness measure of Japanese and its determinants, using a survey in 2002. Figure 1 shows the distribution of reported happiness.