Keeping up with the neighbours and happiness

Sep 2, 2015

It’s not just individuals who get a burst of happiness from doing better than their neighbours, it’s true across countries as well. Researchers at Motu Economic and Public Policy Research found that countries that raise their national per capita income also raise their average life satisfaction.

Motu is a not-for-profit, non-partisan research institute and received funding for this work from the Marsden Fund of the Royal Society of New Zealand.

“We examined data encompassing nearly 80,000 people across 27 countries and 19 years and found very clear results that if your income increases so does your satisfaction with your life,” said Arthur Grimes, Senior Fellow at Motu.

“Interestingly, however, if your income rises at the same rate as the people surrounding you, then you don’t get the same lift in happiness. So we looked into whether people from rural areas or cities were happier and if it mattered what sort of country you live in. We also looked at whether people compared themselves with people in other countries,” said Dr Grimes.

The study looked at OECD founding (developed) countries and countries that are transitioning into developed countries. The work did not have access for statistics in New Zealand.

“Life satisfaction in most transitional countries (which commonly have lower gross national disposable incomes) is below that of most founder OECD countries (which tend to have higher gross national disposable incomes).

Mean Life Satisfaction across Countries

In developed countries town and small city dwellers tend to be happier than those living in large cities. However, in transitional countries, people were happiest in large cities, followed by towns, rural areas and finally small cities.

Mean Life Satisfaction by Settlement Type

“Our results indicate that people in relatively immobile areas, like ‘Old Europe’ and rural areas in transitional countries, worry about doing better than the people around them, while the larger population areas in transitional countries are more up and coming and worry less about how their neighbours are doing,” said Dr Grimes.

The study shows that individuals’ life satisfaction rises as their personal income rises and falls as the incomes of similar individuals within their own country rise.

“Most importantly, however, our findings imply that for any individual country, a rise in per capita income does raise average life satisfaction in that country. This means government can increase citizens’ wellbeing through supporting policies that increase the national income,” said Dr Grimes.

The Motu working paper Relative Income and Subjective Wellbeing: Intra-national and Inter-national Comparisons by Settlement and Country Type by Motu researcher Arthur Grimes and University of Auckland student Marc Reinhardt, was made possible by grants from the Marsden Fund of the Royal Society of New Zealand and the Resilient Urban Futures programme of the Ministry of Business, Innovation and Employment.