WRITTEN BY OLADELE ABIGAIL
An average individual wants to be happy. Happiness matters so much to every individual and in every environment. This is needed as it leads to intelligence, activeness, a safe and friendly environment. Just as happiness brings about a positive feeling to an individual, it is important to know if happiness will bring about the same effect to an economy. This paper therefore, looks into the correlation between happiness and economic development and its causal effect.
Economic development is seen as a sustainable increase in the overall standard of living of citizens in a nation. It is important to note that economic development is quite different from Economic growth. While economic growth refers to an increase in output of a nation’s goods and services, economic development refers to a sustainable increase, that is, the increment must be felt for a long period of time. Economic development could be measured using gross national product per capita, consumption per capita, infrastructure development, organization structure of the labor force or social conditions. However, the most commonly used is the Gross domestic product and the human development index.
The term happiness could mean getting maximum utility from a product or service, or having a better quality of life depending on the context. Economic happiness shows the relationship between an individual satisfaction and economic issues such as employment level so as to discover the factors that could increase and decrease human wellbeing and quality of life. Happiness is a subjective measure and could be measured using a nation’s social indicator or the nation’s happiness index.
From empirical literature, researchers have gotten both a positive and negative relationship between happiness and development. Richard A. Easterlin et al (2011) proved that there exists a positive relationship between happiness and income in the short term while Teng Guo, and Lingyi Hu (2011), investigated the relationship between happiness and different economic variables in the United States. Their results showed that individual well-being can be predicted and measured. Authors concluded that there is an inverse relationship between happiness, unemployment and inflation.
According to Maddison (1991), despite the improvement and increase of per capita gross domestic product (GDP), happiness has not achieve any improvement through his study.
Teng Guo, and Lingyi Hu (2011), investigated the relationship between happiness and different economic variables in the United States. Their results showed that individual well-being can be predicted and measured.
Authors concluded that there is an inverse relationship between happiness, unemployment and inflation, and this has been proven by many previous studies
The apriori expectation shows that there should be a positive relationship between economic development and happiness. For example, if household income increases, the living condition of such individual will increase and this will bring about happiness. The increase in income will lead to economic growth. If this increment is sustained, it will lead to economic development.
Statistically, The Happiness Index of 2018 shows that Finland, Norway and Denmark were the top three countries. Looking at their respective human development index, Norway ranked first. This is to show that there is a positive correlation between economic development and happiness. Denmark ranked 10th while Finland ranked 15th in the world.
In Nigeria, the happiness index has been on the increase side, so as the human development index. This conforms with apriori expectations and is shown in the table below. Nigeria is however, not seen as a developed nation as it ranked 157 out of 189 countries in the world.
India is known to be one of the developed economy in the world. The Happiness Index showed that India ranked 133rd in the world as at 2018, which is in contrast with apriori expectations. This shows that there are also non-economic factors in a nation that could hinder happiness and still lead to economic development.
According to Hermalin and Isen (2008), sadness can trigger an individual to be more focused on themselves and see themselves as people with low worth. This feeling could increase their purchasing power to get products (thereby increasing output) that could make them feel better about themselves.
We based our results on statistical data gotten from various sources and match it with apriori expectations. We cannot fully establish if happiness has a positive or negative relationship with economic development until statistical tests (for example, regression analysis) are carried out. Conclusively, sustainable growth or economic development is the pathway to the future every economy want; every nation should use both its economic factors and non-economic or social factors to pursue economic development.
Written by Oladele Abigail
Oladele Abigail, an economics graduate of Bowen University who applies her passion for writing to her career path.
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