Putting a Price Tag on Happiness

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


This report was prepared by Majed Skaini and Sadim Sbeiti.
For additional inquiries, please contact: skaini@un.org

Can we measure the price of happiness?

Does a higher income suggest a higher level of happiness? Can we compare happiness levels between different countries based on their average per capita 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?

Although there exists an established relationship between income and happiness, studies have shown that happiness does not rise indefinitely with a rising income, but that there is a point after which more income does not significantly lead to greater happiness if we look at the life evaluation component of subjective well-being. 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 different educational levels (Jebb, Tay, Diener & Oishi, 2018).

Price of happiness around the world

In an effort to estimate the price of happiness, defined as the amount of income required to keep individuals from being unhappy, Gallup World Poll conducted a worldwide survey over the period of 12 years - from 2005 to 2016 - collecting data on monthly household income from 1.7 million people across 164 different countries classified into nine regions. Jebb et al. (2018) converted the monthly household incomes reported in local currencies to annual income in international US Dollars using purchasing power parities and converted raw household incomes to equivalized incomes to reflect individual income.

The global satiation point for life evaluation stood at USD 95,000 per person, with variations between world regions ranging from USD 35,000 in Latin America and the Caribbean to USD 125,000 in Australia and New Zealand. The results suggested that satiation occurred at higher income levels in wealthier countries and regions. An article on Expensivity by Arney (2021) converted the price of happiness for over 160 countries based on the 2018 paper by Jebb, Tay, Diener and Oishi using global purchasing power parities and presented the results in US Dollars. Out of the covered countries, happiness was found to be most expensive in Bermuda at USD 143,933 per year, while it was found to be the cheapest in Suriname, with an annual premium of only USD 6,799. Although the article covered 14 Arab countries, none of them fell within the top 10 countries with the highest or lowest price of happiness in the world.

Turning the spotlight onto the Arab region

Focusing on the Arab region, we applied our most recent regional purchasing power parity estimates for 2019 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, and we presented our results in US Dollars for ease of comparison. Given diversity and cost of living differences between Arab countries, happiness satiation points vary widely from one Arab country to another as shown in figure 1.

Figure 1 - Price of Happiness for 2019 Across the Arab Region, per annum

In general, taking into consideration the 16 Arab countries shown in figure 1, the average price of happiness in the Arab region in 2019 turned out to be around USD 54,711. Out of the 16 examined countries, Qatar, Kuwait and the United Arab Emirates appear to be the three Arab countries where happiness was most expensive to satiate in 2019 at USD 75,347, USD 69,899 and USD 67,063 respectively, while Sudan appears to be the Arab country where happiness was least expensive to be attained, with a price of USD 16,859 in 2019. An observation worth noting is that not only did Libya have the highest happiness premium among the Arab countries in Africa, but it also had the highest happiness premium out of all the African countries in general (Arney, 2021). In the Gulf region, the happiness satiation point in the United Arab Emirates being lower than that in Kuwait and Qatar might encourage individuals aspiring to move to the Gulf region to choose the United Arab Emirates instead of Kuwait or Qatar. However, these values cannot be compared between countries in absolute terms, as average individual incomes also vary widely from one country to another. In other words, when comparing the price of happiness between countries, differences in average individual incomes between these countries should also be taken into consideration for better, more informed decision making.

To compare where each country’s residents are in terms of satiation of life evaluation, we can compare the price of happiness in each country with its per capita income. Comparing the prices of happiness in 16 Arab countries with their per capita incomes in figure 2, we notice that, although it is common in the observed countries that the average person is far from attaining happiness, the gap between the average per capita income and the price of happiness varies extremely between countries depending on each country’s income status. For instance, a resident of the United Arab Emirates or Qatar with an average income is closer to satiating his/her happiness than a resident of Sudan with an average income.

Figure 2 – Price of Happiness vs. Per Capita Income in Arab Countries (in Local Currency Units), per annum, 2019

Algeria

Bahrain

Egypt

Iraq

Jordan

Kuwait

Lebanon

Libya

Morocco

Oman

State of Palestine

Qatar

Saudi Arabia

Sudan

Tunisia

United Arab Emirates

The price of happiness by gender

Would the price of happiness differ by gender? Surprisingly, and as affirmed by Jebb et al. (2018), happiness is more expensive to attain for women than men. Globally, the happiness satiation point for a woman occurred at USD 100,000 while it stood at USD 90,000 for a man. We went further and calculated the price of happiness by gender for the different countries in the Arab region using our updated regional purchasing power parities for 2019 after adjusting the gender-based satiation points to reflect 2019 price changes. Our results, presented in figure 3, illustrate the differences between the individual prices 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 USD 57,523 per person in 2019, results imply that an average man in Lebanon could satiate his happiness at USD 54,495, whereas a woman would require USD 60,550 per year in order to reach the happiness satiation point. In Egypt on the other hand, a woman needed USD 29,047 per year to reach the satiation point, an amount that is higher than the national price of happiness of USD 27,595, while a man needed only USD 26,143 to satiate happiness. The differences between the prices of happiness for men and women can be observed in the rest of the Arab countries in figure 3 below.

Figure 3 – Price of Happiness in Arab Countries by Gender, per annum, 2019
Men (yellow) / Women (red)

Intra-country analysis

Digging into more in-depth comparison of the price of happiness within different regions of a country itself, and given the intra-country differences in costs of living, price levels and currency purchasing power, happiness satiation points also differ between regions of the same country. Sub-national purchasing power parities are the best converters to be used to derive the variation of the price of happiness among the different regions within a country as they correct for changes in cost of living and different price levels. In an earlier initiative, we at ESCWA conducted a special project for the United Arab Emirates in 2015 and produced sub-national purchasing power parities below the country national level.

We employed our sub-national purchasing power parity computations for the United Arab Emirates to compare the individual price of happiness among the seven different emirates. With a price of happiness for the United Arab Emirates standing at AED 246,289 in 2019, we used the sub-national purchasing power parity estimates of UAE to convert happiness satiation points for each one of the seven Emirates as seen in Figure 4.

Figure 4 – Price of Happiness within the United Arab Emirates by Emirate, per annum, 2019


The highest happiness premium - or satiation point for life evaluation - in the United Arab Emirates was witnessed in the capital, Abu Dhabi, at AED 261,610, followed by Dubai, while the lowest annual satiation point was observed in Umm Al-Quwain at AED 147,554.

Conclusion

In summary, we conclude that income is one of the main factors affecting happiness. However, happiness does not rise indefinitely with a rising income, but instead reaches a satiation level after which an increase in income does not lead to a significant increase in happiness. Moreover, we notice that in general, wealthier countries require a higher level of income to reach the satiation point.

We employed our 2019 regional purchasing power parities to showcase the prices of happiness in different Arab countries in 2019, and we also computed prices of happiness for 2019 in the different emirates of the United Arab Emirates using the 2015 sub-national purchasing power parities computed by ESCWA for the United Arab Emirates. These results are of importance to governments, as well as to organizations and individuals, as they might be employed for policymaking, salary scale setting, or to provide an answer to the long-asked question of whether money can buy happiness.

An interesting question which might be worth exploring in the future is whether differences in the prices of happiness have an impact on productivity levels, especially in different regions within the same country.

References

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

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.

United Nations, 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. United Nations publication.
https://icp.unescwa.org