Happy PIIGS?

This paper investigates the causality dynamics between happiness and per capita GDP growth and the impact of the recent financial crisis using a VAR–GARCH model for 10 European EMU countries divided in peripheral and non-peripheral members. The rationale of the analysis is to look at the two different dimensions (mean and variance) of economic growth and happiness within a time-series framework. The results show that GDP growth has significant positive effects on happiness in all countries considered, particularly in the PIIGS countries; happiness volatility is responsive to economic uncertainty. The size of this effect is bigger following the most recent crisis period, especially for the PIIGS countries. Our findings confirm the important role played by economic growth in determining population happiness and, most importantly, provides new evidence on the existence of causality linkages between economic uncertainty and happiness volatility.