GDP Per Capita and Happiness

GDP Per Capita and Happiness


The essay will focus on the relationship between GDP per capita and happiness. The main objective will be to establish whether there exists a correlation between the two factors. The discussion compares happiness from a number of countries, such as the United States, UAE, Canada and Norway, with an aim of examining the role of GDP per capita. Further, the essay will provide the policy measures that need to be taken into consideration in enhancing happiness. The position of the paper is that GDP per capita has a role to play in fostering happiness. However, the increase in GDP per capita in most countries has not necessarily led to happiness in equal measures. Factors such as job security, economic equality, and access to affordable and quality education and health services also play a significant role in determining happiness. Hence, the question is how the GDP per capita has been used to improve the general lives of the citizens. Countries will high job securities, improved health care services, and affordable education systems are more likely to have happier citizens. The essay will conclude by providing recommendations on what should be done to ensure that GDP per capita correlates with happiness.

Happiest countries globally

A global Gallup poll conducted between 2012-2014 has established that the happiest countries are Switzerland, Iceland, Denmark and Canada. The least happy were Burundi, Syria and Rwanda. Countries such as the United States, Germany, UK and France did not appear in the top 10 list of the happiest countries. The survey involved 3,000 people in each country globally. The main factors that were considered included general cost of living, and whether people considered themselves happy. The other factors considered include the job security, access to affordable health and education. Further, economic and political stability was also some of the main factors that were considered. In countries such as Syria and Burundi, political instability, poor health services and lack of fundamental human rights were cited as the main reasons that made people less happy compared to that of other nations. Further, the study indicated that while a higher GDP per capita and a strong economy could lead to improved living standards, it is not always a measure of happiness. This was concluded, after the countries with the highest income failed to appear in the top 10 list of the happiest counties.

GDP Per capita in developed and developing countries

The countries with the highest per Capita income include Qatar, Luxembourg, Norway, Singapore, Brunei and the United States. Switzerland, Netherlands, Ireland, Australia and Austria also make the top 10 list of the countries with the highest GDP per capita. Countries with the least GDP per capita include India, and a majority of other developing countries. There is a great discrepancy between the GDP per capita and the global wellbeing. Only 30% of the countries in top 10 lists of happiest countries have the largest per capita income. These include Australia, Switzerland and Norway. Qatar, which has the highest per capita income, is not among the happiest countries in the world. Similarly, countries with the highest GDP per capita in Europe, such as Germany, UK and France did not make it to the top 10. Diener, & Martin (2004), indicate that a higher GDP per capita does not always predict increased happiness within the population. On the other hand, though, countries with the lowest GDP per capita have also been ranked amongst the least happy, according to the Gallup global polls. The countries include Rwanda, Burundi, and the Central African Republic.

Diener, & Martin (2004) further argues that the GDP per capita leads to happiness up to a certain level of human satisfaction. Once people have had their basic needs satisfied, an increment in GDP per capita does not make any significant increase in happiness. This may be true for countries such as the United States, Germany and the United Kingdom. The United States have also been able to respond to the challenge of unemployment by creating more employment opportunity and focusing on investment that generates more ikncome and expanding its economy therefore accommodating more people in the employment sector. Easterlin et al., (2009), further points out that unemployment has decreased from about 10% in 2010 to less than 6% as compared to the growing economic trends. Countries with the lowest GDP per capita have difficulties in ensuring that citizens have access to basic needs such as food, clean water, education and decent shelters. This is the situation in most developing countries, such as Kenya, Rwanda, and India. A majority of these countries depends on donor funding to address social challenges with an aim of improving the standards of living. With this kind of situation, job creation and poverty eradication are greatly hampered.

In the sub-Saharan Africa, for instance, a majority of the people subsists in less than $2 a day. Factors such as bad governance, corruption and insecurity have been cited as the main reasons for the increased poverty in most of these countries. Under exploitation of resources, such as minerals in most countries has made it difficult to increase the level of GDP per capita . For this reason, such countries are unable to improve the living standards of the people. However, the question of whether the increase in GDP per capita actually leads to a happier population still arises when comparing countries such as Nigeria. For instance, the current statistics indicate that Nigeria is one of the richest countries with a GDP per capita of over $500 billion. However, the country has the highest number of unemployed and poor people in the continent. There are poor health standards that have maintained the infant mortality rate highest. This scenario is also replicated in countries such as India, where, despite the high GDP per capita a majority of people have low standards of living.

Cost of living and happiness

Frey, & Alois Stutzer (2002), argues that there is a close relationship between the cost of living and happiness. This is projected by the increased employement rate which brings about higher wages to the working population leading to a higher standards of living that are affordable to the people. The cost of education in most countries such as the Switzerland, United States and Norway is high. It also demonstrates that the happiest countries spend more on education. Almost the 90% of the happiest countries have a higher cost of education. Hence, the cost of education alone cannot be used to determine the people’s happiness. The biggest question is whether the people have the ability to afford the high cost of education based on the equitable distribution of resources (Frey, & Alois Stutzer 2002). The United States has one of the highest economic inequalities.

Kahneman, et al., 2010 added that according to the Statistics, a fifth of the population in the United States control about 88% of the all the wealth. This is an indication that there is unequal distribution of wealth. The situation has further been attributed to the inequitable distribution of income in the country. It is apparent that there is a huge gap in earning within the population. For instance, 22.5% of the population earned more than $394,000 in 2012. This is compared to 49.6% of the population who earned about $114, 000 in the same period. The income inequality in the United States and other developed countries has been one of the main causes of unhappiness. People feel that their governments are not doing enough to ensure that there is an equitable distribution of wealth. The cost of living in countries such as the United States is high; hence, people have to work harder in order to meet their daily needs. The situation is different in the happiest countries, such as Norway and Denmark. The governments have played an imperative role of addressing the existing social and economic inequalities. The goal has been to ensure that the gap between the poor and the rich is minimized (Kahneman, et al., 2010). The countries have also worked harder with an aim of reducing the cost of living to the people.

Regrettable expenditures and happiness

Most countries spend their revenue on factors that do not assist in improving the citizens’ general welfare. Critics have indicated that countries that spend more on regrettable expenditures are more likely to have the less happy population. One of the current regrettable expenditures is security. With the increased level of insecurity characterized by terror threats, most countries have increased their spending on security equipment and training. According to Layard (2003), the highest spenders in the military are the United States, Russia, China, India and Britain. These countries are not amongst the top happiest, indicating that the regrettable spending may have an effect. Further, countries with the highest GDP per capita are also the ones spending more on military and other activities that enhance the influence of such countries. It is also apparent that the countries that spend more on security matters are faced with real or imagined threats. For instance, the United States is a victim of terrorist attacks, especially the 9/11 incidence. There has been increased tension between China and India over border points; hence, the countries have to ensure that they are prepared militarily to respond to any forms of aggression (Layard, 2003). These countries spend billions of dollars on regrettable expenditures, which could have been used to improve the general welling of the people. In India, for instance, the funds could be used to build more hospitals in the remote parts of the country in order to prevent high infant mortality rates.

Environmental issues and happiness

China has become one of the fastest growing economies in the world. This has been attributed to the high rate of urbanization and industrialization. China has increased its presence in Africa from where it has been able to acquire more resources such as oil to respond to the current demand (McCombie, 2015). Similarly, countries such as the United States and India are also witnessing an increased growth and development of their industries. While this is imperative in generating more income and creating more employment opportunities, there is a huge challenge to the environment. In China, for instance, the pollution has been felt by the people. Pollution has been affecting visibility in China, and also posing some health related threats. McCombie (2015), further argues that a majority of these countries declined to sign the Kyoto protocol that would have ensured that they abide by the rules and regulations of environmental conservation. The lack of environmental conservation is becoming a threat to food security in most countries. The unpredictable weather conditions have affected the crop production in countries that rely mostly on rain to grow crops. Major catastrophes such as Tsunamis have also been attributed to global warming. The accelerated rate of industrialization in many developed countries has also led to an increased in carbon dioxide emission. Oswald & Andrew (2008), elaborate that countries such as Norway, Denmark, Switszland and Australia have played a significant role towards sequestration of carbon dioxide. The environmental laws in Australia, for instance, have been able to curb emission of poisonous gases from industries.

Social connections (social capital), political freedoms and happiness

Even with increased GDP per capita, people are likely to report less satisfaction with the government if the political freedoms and social connections are missing. Lack of political freedoms in countries such as China and Russia has made it difficult for the people to express themselves and criticise their government (Sacks, et al., 2013). Freedom of the press has also been hampered in most countries, especially in the developing world. While the United States protects the fundamental human rights, a high number of populations have low social capital. Due to the amount of time spent at work, people have less time to form social bonds through interactions. Social bonds are vital in preventing major psychological illnesses such as stress and depression. These mental illnesses are highest in most of the developed countries. Hence, people can also succumb to mental illness, and engage in self-destruction behavior such as alcoholism and drug abuse even when they are economically stable.

From the above analysis, it is clear that happiness is not necessarily equated to GDP per capita. People’s happiness is not only determined by their ability to access the basic needs. They need to feel secure, and have a clean atmosphere. The people also need to be convinced that the taxes they pay are spent on activities that will directly affect their lives. For instance, spending towards construction of hospitals, schools and roads can actually lead to more satisfaction to the community. They feel that such developments will automatically lead to their improved wellbeing. However, it is imperative to note that a high GDP per capita plays a huge role in addressing challenges within a society. For this reason, the following policy changes need to be made implemented in order to ensure that the GDP per capita equals happiness.

Reduction of government regrettable expenditures

The government should ensure that most of the income is spent on projects that will automatically lead to improvements of the standards of living of the citizens. This may include investing more on education, health and the reduction of poverty. In the developing countries, for instance, the goal should be to empower the youth and women economically through creation of more employment opportunities. Making the cost of education affordable means that more people will enroll in the institutions of higher education (Stevenson, et al., 2008). This on the other hand means that more people will have the skills and knowledge required in the job market. The illiteracy rate is still high in some countries, meaning that such people are not ready to enter the job market. On the other hand, most of the sub-Saharan African countries suffer from high infant mortality rates. This is mostly attributed limited number of healthcare facilities, doctors and drugs. Instead of spending billions of dollars on the military, more hospitals can be constructed, while also making the cost of health more affordable.

Equitable distribution of wealth

There is a need to ensure that the gap between the poor and the rich is minimized. This can be enhanced by ensuring a change in the tax policies. For instance, the rich should be taxed more than those in the lower salary bracket should. While this has received a lot of criticism in most countries, it is one of the ways that will ensure that the wealth is equitably distributed. The governments should also focus on ensuring that certain people who earn low salaries are exempted from taxes (Stevenson, et al., 2008). This will ensure that such people have more disposable incomes. They can have more savings are able to improve their economic wellbeing.

Protection of human rights and environment

Every government has a responsibility of ensuring that its citizens are not exposed to respiratory ailments, and other health complication. This is promoted by ensuring that pollution is minimized. The community should be encouraged to take part in environmental conservation. Even with the accelerated industrialization, the government should ensure that this is not done at the expense of the environment (Stevenson, et al., 2008). On the other hand, it is imperative to ensure that the fundamental rights of the people are protected. The rights to expression, life and association should be fostered. Countries that do not respect the fundamental human rights ought to change if they are to have a happier society. The freedom of the press should also be safeguarded to ensure that journalists provide unbiased news without any fear of negative sanctions.


Diener, Ed, and Martin E.P. (2004). “Beyond money: Toward an economy of well-being.” Psychological Science in the Public Interest 5: 1-31.

Easterlin, Richard A., and Onnicha Sawangfa.(2009). Happiness and Economic Growth: Does the Cross Section Predict Time Trends? Evidence from Developing Countries. mimeo, University of Southern California.

Frey, Bruno S., and Alois Stutzer. (2002). “What Can Economists Learn from Happiness Research?” Journal of Economic Literature 40: 402-435.

Kahneman, Daniel and Angus Deaton. “High Income Improves Evaluation of Life But Not Emotional Well-Being” Proceedings of the National Academy of Sciences, September 7 2010, 107(38) 16489-16493.

Layard, Richard. “Happiness: Has Social Science a Clue.” (2003). Lionel Robbins Memorial Lectures 2002/3. London School of Economics.

McCombie, J. Is Growth Passé? and the Economics of Happiness, Centre for Economic and Public Policy, University of Cambridge, session 4, 2015

Oswald, Andrew J. (2008). “On the Curvature of the Reporting Function from Objective Reality to Subjective Feelings.” Economics Letters.

Sacks, Daniel, Betsey Stevenson, and Justin Wolfers “The New Stylized Facts About Income and Subjective Well-being”, Emotion, Dec 2012, 12 (6): 1181-1187

Sacks, Daniel, Betsey Stevenson, and Justin Wolfers “Growth in Subjective Well-being and Income over Time”, 2013 mimeo.

Stevenson, Betsey, and Justin Wolfers. (2008). “Economic Growth and Happiness: Reassessing the Easterlin Paradox.” Brookings Papers on Economic Activity, Spring 1-87


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