Putting a Price Tag on Happiness

Using Purchasing Power Parities to Compare the Price of Happiness within the Arab Region


Price of happiness around the world Turning the spotlight onto the Arab region Price of happiness by gender Conclusion

Can we measure the price of happiness?

Can happiness be measured? Is it the outcome of a single factor or is it a multidimensional construct? Does a higher income suggest a higher level of happiness? Can we compare happiness levels between different countries based on their individual incomes? Is there a cutoff level of absolute income that can keep us from being unhappy, or is happiness a relative concept which cannot be measured?

A long-term study by Harvard University revealed that close relationships are the biggest determinants of happiness - more so than money, fame, intelligence, good genes, or social class (Mineo, 2017). However, although necessary, good relationships alone are not sufficient to attain or satiate happiness. In fact, happiness is a multidimensional phenomenon determined by a multitude of factors. According to the World Happiness Report 2020, predictors of average happiness across countries include income measured in terms of per capita GDP, social support, healthy life expectancy at birth, freedom to make life choices, generosity, perceptions of corruption, positive affectivity, and negative affectivity. Of these various factors, social support appears to be the largest contributor to happiness, a finding in line with the outcome of the study conducted by Harvard University. Income follows as the second largest contributor to happiness, which will be represented by life evaluation for the purposes of the present report.

Although there exists an established relationship between income and happiness, studies have shown that happiness does not rise indefinitely with a rising income. There is a point after which more income does not significantly lead to greater happiness, when considering the life evaluation component of subjective wellbeing. This satiation point occurs at different levels of income in different regions and countries based on price levels and costs of living, and it also differs between genders and educational levels (Jebb and others, 2018).

Price of happiness around the world

According to a paper by Jebb and others (2018) based on a worldwide survey conducted by Gallup World Poll, the global satiation point for life evaluation stood at $95,000 per person, with variations between world regions ranging from $35,000 in Latin America and the Caribbean to $125,000 in Australia and New Zealand. Within Europe, the satiation point varied between $100,000 in Western Europe/Scandinavia and $45,000 in Eastern Europe/the Balkans. The results suggest that satiation occurs at higher income levels in wealthier countries and regions.

An article on ‘expensivity’ by Arney (2021) found happiness to be most expensive in Bermuda at $143,933 per year, and cheapest in Suriname with an annual premium of only $6,799. Switzerland, which ranked fourth globally, was the country where happiness appeared most expensive to satiate in Europe at $128,969 per year, an amount higher than that required in the United States of America, which came in tenth place worldwide with an annual happiness premium of $105,000. At the other end of the spectrum, Argentina ranked second cheapest in terms of happiness satiation worldwide at only $8,778 per year, while Turkey ranked ninth cheapest at only $10,742 per year. No Arab country fell within the top 10 countries with the highest or lowest price of happiness worldwide.

Turning the spotlight onto the Arab region

Focusing on the Arab region, the most recent regional purchasing power parity (PPP) estimates for 2019 were applied to estimate the price of happiness in 16 Arab countries, after adjusting the price of happiness reported by Arney (2021) to accommodate for price changes and reflect the 2019 price. The results were presented in United States dollars for ease of comparison. Given diversity and cost of living differences between Arab countries, happiness satiation points vary widely between Arab countries, as shown in figure 1.

Figure 1: Annual price of happiness across the Arab region (in dollars), 2019

Source: ESCWA estimates and extrapolations based on expensivity data.

Taking into consideration the 16 Arab countries shown in figure 1, the average price of happiness in the Arab region in 2019 was around $54,711. Of the 16 countries, Qatar, Kuwait and the United Arab Emirates were the three Arab countries where happiness was most expensive to satiate in 2019 at $75,347, $69,899 and $67,063, respectively. The Sudan was the Arab country where happiness was least expensive at $16,859.

When comparing the price of happiness between countries, differences in average individual incomes between those countries should also be taken into consideration for more informed analysis. Figure 2 compares each country’s price of happiness with its per capita GDP and per capita private consumption expenditure in local currency units, revealing that in all 16 Arab countries, an individual with an average income is far from reaching the national happiness satiation point.

Figure 2: Price of happiness versus per capita income in Arab countries (in local currency units), 2019

Algeria

Bahrain

Egypt

Iraq

Jordan

Kuwait

Lebanon

Libya

Morocco

Oman

State of Palestine

Qatar

Saudi Arabia

Sudan

Tunisia

United Arab Emirates

Source: ESCWA official statistics and estimates.

Figure 2 also reveals that the gap between the average per capita income and the price of happiness varies considerably between countries, depending on each country’s income status. To assess in which country the average individual is closer to satiating their happiness, we normalize per capita GDP by setting it equal to 1 in all countries, and compare the ratio of the price of happiness to per capita income across Arab countries in figure 3. The findings suggest that a resident of Qatar or the United Arab Emirates with an average income is closest to satiating their happiness, while a resident of the State of Palestine or the Sudan with an average income is farthest from attaining the national happiness satiation point.

Figure 3: Price of happiness as a multiplier of per capita GDP in 2019

Source: ESCWA official statistics and estimates.

Price of happiness by gender

Does the price of happiness differ by gender? We calculated the price of happiness by gender for the 16 Arab countries using our updated regional purchasing power parities for 2019. Our results, presented in figure 4, illustrate the differences between the individual price of happiness for men and women in Arab countries. If we look at Lebanon, for example, where the average annual price of happiness stood at $57,523 per person in 2019, results imply that an average man in Lebanon could satiate his happiness at $54,495 per year, whereas a woman would require $60,550 to reach the happiness satiation point. In Egypt, on the other hand, a woman needed $29,047 per year to reach the satiation point, an amount higher than the national price of happiness of $27,595, while a man needed only $26,143 to satiate happiness. The differences between the prices of happiness for men and women can be observed in the other Arab countries, as shown in figure 4.

Figure 4: Annual price of happiness in Arab countries by gender (in dollars), 2019
●Men (yellow) / ●Women (red)

Source: ESCWA estimates and extrapolations based on data from Jebb and other (2018).

Figure 4 shows that across all Arab countries, happiness is more expensive to attain and satiate for women than men. Nonetheless, figure 4 also reveals that although the price of happiness is more expensive in Qatar than Kuwait when we compare between two individuals of the same gender, however if we compare the price of happiness between two individuals of opposite genders, we would find that happiness would be more expensive to satiate for a woman in Kuwait than for a man in Qatar. Similarly, comparing happiness prices within the same gender, we find that the price of happiness is lower in Oman and the State of Palestine than in the United Arab Emirates. However, a cross-gender comparison reveals that happiness is cheaper for men in the United Arab Emirates than for women in the State of Palestine, whereas it costs almost the same for a woman in Oman to satiate happiness as for a man in the United Arab Emirates.

Conclusion

Income and good relationships, along with other subjective variables, are the main determinants of happiness. In the present report, we employed our 2019 regional purchasing power parities to showcase the price of happiness in 16 Arab countries in 2019. However, since happiness is satiated by meeting a certain annual premium, the price of happiness does not have to be borne by the individual alone. Governments and non-profit institutions serving households can also play a role in contributing to the price of happiness, thus lowering the cost to be assumed by the individual and making it possible to attain and satiate happiness.

The findings of the present report could thus serve as hard evidence to guide Governments in setting policies and guiding the activities of other organizations towards achieving the Sustainable Development Goals, which would further advance the attainment of happiness by all, thus improving life evaluation and contributing towards shared happiness satiation.

References

Arney, J. (2021, March 9). The Price of Happiness in Every Country. Expensivity.
https://www.expensivity.com/price-of-happiness-by-country

Economic and Social Commission for Western Asia (2020). Purchasing Power Parities and the Real Size of Arab Economies: A Comprehensive Regional Report Covering PPP Results for the Years 2011 to 2019.E/ESCWA/CL4.SIT/2020/TP.4. Beirut.

Helliwell, J. F., and others (2020). Social Environments for World Happiness. World Happiness Report 2020, 13-45.

Jebb, A. T., Tay, L., Diener, E., & Oishi, S. (2018). Happiness, Income Satiation and Turning Points Around the World. Nature Human Behaviour, 2(1), 33-38.

Mineo, L. (2017, April 11). Good genes are nice, but joy is better. The Harvard Gazette. Available at https://news.harvard.edu/gazette/story/2017/04/over-nearly-80-years-harvard-study-has-been-showing-how-to-live-a-healthy-and-happy-life/