The nexus between happiness and economic performance: New insights from global panel data / Lee Yok Yong

Lee , Yok Yong (2024) The nexus between happiness and economic performance: New insights from global panel data / Lee Yok Yong. PhD thesis, Universiti Malaya.

	PDF (The Candidate's Agreement) Restricted to Repository staff only Download (338Kb)
	PDF (Thesis PhD) Restricted to Repository staff only until 31 December 2026. Download (3938Kb)

Abstract

The global financial crisis has prompted the reconsideration of gross domestic product as an all-encompassing measure of standard of living and societal progress. Accordingly, there is a growing consensus to pursue growth-oriented policies that incorporate happiness. Nevertheless, conventional economic growth models predominantly focus on macroeconomic factors and under-recognise happiness as an engine of the standard of living. This study aims to investigate the effect of happiness on the standard of living, the moderating effect of institutional quality on the relationship between happiness and the standard of living, and the channels (i.e. human capital, labour productivity and life expectancy) through which happiness improves the standard of living. The empirical model adopted in this study is grounded on the augmented Solow model. The panel datasets from 104 countries spanning 2006 to 2018 were scrutinised. The two-step difference generalised method of moments robust standard errors was applied to examine the effect of happiness on the standard of living measured by income per capita. The empirical results imply that increasing happiness can lead to an improvement in the per capita income, ranging from 1% to 3%. Importantly, the positive effect of happiness on the standard of living is approximately four times greater in developed countries than in developing countries. The existing literature addressing the effect of happiness on the standard of living is ambiguous, often underplaying the potential moderating effect of institutional quality in explaining the divergent findings. The moderating effect of institutional quality on the relationship between happiness and the standard of living was explored using a two-step system generalised method of moments. The empirical results indicate that the relationship between happiness and the standard of living is contingent on the aggregate institutional quality. The rule of law and voice and accountability significantly influence this relationship in developing countries. Despite theoretically identifiable channels through which happiness improves the standard of living, empirical evidence remains scarce, revealing a research lacuna. Non-recursive structural equation modelling was conducted to determine the mediating effects of human capital, labour productivity and life expectancy on the relationship between happiness and the standard of living. The empirical results reveal that labour productivity is the dominant mediator in the relationship between happiness and the standard of living, applicable in both developing and developed countries. Developing countries exhibit equal importance for human capital and life expectancy, whilst life expectancy surpasses human capital as a mediator in developed countries. In conclusion, this study highlights the importance of governments implementing growth-oriented policies incorporate happiness. It provides policy-relevant implications, emphasising investment in people and ensuring inclusivity. The enhancement of human capital, increased labour productivity, and extended life expectancy contribute to the development of skills, creativity, and efficiency among the people, who are the greatest assets of any country.

Actions (For repository staff only : Login required)