Saturday, March 08, 2008

Income, Happiness....and Democracy?

Mark Thoma has a very nice post summarizing recent work on Income and Life Satisfaction. In the post he includes a graph from Angus Deaton:

A couple of things stand out to me (beyond the correlation between income and life satisfaction that others discuss). First, people in India have remarkably high life satisfaction in light of their economic condition--Indians are much happier than Chinese and Russia, and about as happy as people in Hong Kong. I believe this: despite the fact that one encounters appalling and widespread poverty in India, the place is vibrant, friendly and fun.

But more important, it appears that once one controls for income, democracy and transparency are important predictors of happiness (of course, one would have to run some sort of regression with some sort of proxy for openness of government institutions to figure this out). This really stands out at the $30,000 level; on the other hand, people in Venezuela and Saudi Arabia are happier than average for their income classes, and they are hardly democratic.

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