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### Investigating Macroeconomic Determinants of Happiness: Government Expenditure Impact in Transition Countries ###

This study explores the impact of government expenditure on happiness in transition countries. Analyzing data from Central and Eastern European countries, the research investigates the non-linear influence of government spending on happiness, considering factors like unemployment, inflation, and GDP. By examining both micro and macro data, the study offers insights into the relationship between government expenditure and life satisfaction. ###

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### Investigating Macroeconomic Determinants of Happiness: Government Expenditure Impact in Transition Countries ###

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  1. Investigating Macroeconomic Determinants ofHappiness in Transition Countries: HowImportant is Government Expenditure? Lena Malešević Perović and Silvia Golem University of Split, Faculty of Economics Dubrovnik, 24 June 2009

  2. Introduction - happiness functions • “Taking all things together, would you say you are: • 1 – very happy, • 2 – quite happy, • 3 – not very happy, • 4 – not at all happy”. • General form:

  3. Literature review - micro variables • Happiness is higher for: • women; • married people; • more educated people; • those with higher income; • the young and the old (U-shaped in age) and • the self-employed.

  4. Literature review - macro variables • Rarely analysed; • Usually included variables: inflation, GDP, unemployment, government expenditure; • Di Tella et al. (2001) find thatpeople would trade-off a 1 percentage point increase in the unemployment rate for a 1.7percentage point decrease in the inflation rate.

  5. Literature review - government expenditure • Bjornskov et al. (2007):find anegative relationship between life satisfaction and government consumption spendingin a cross-section of 74, mainly developed, countries. • Kacapyr (2008):finds that the ratio ofgovernment spending to GDP isstatistically insignificant determinant of life satisfactionin the cross-country sample of 63 countries. • Ram (2009): finds apositive relationship between government consumption and happiness employing a broad(er) cross-country sample of transition, developed, African and Latin American countries.

  6. Our approach to including macro variables in happiness equation • Unemployment; • Inflation; • GDP; • Government expenditure.

  7. Empirical analysis • Analysed countries: Albania, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia and Macedonia (Central and Eastern European Countries). • Micro data: World Values Survey - waves 3, 4 and 5; • Macro data: World Development Indicators; • The model we use is:

  8. The results - general

  9. Marginal effect on macroeconomic variables in different combinations

  10. Marginal effects for different values of macro and micro variables

  11. Conclusion • Government expenditure significantly and non-linearly influences happiness in transition countries; • Successful women vs. unsuccessful men;

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