The Relationship Between Consumption and Happiness: A Cross-Country Analysis

This study examines the relationship between household consumption and happiness across countries. We compare the top 50 countries ranked by happiness with those ranked by average household consumption per capita and analyze the association between happiness and consumption through data patterns and cross-sectional regression models. Although the focus of the paper is on the top 50 countries ranked by happiness and consumption, we also extend our regression analysis to a broader group that includes low- and middle-income countries. We employ an ordinary least squares regression framework with log-transformed consumption and inequality (Gini index) as primary predictors. Our results indicate that higher household consumption is positively associated with happiness, but the relationship is complex and varies across country groups. Consumption plays a bigger role in influencing happiness in the top 50 consumption group and in the broader cross-country sample compared to the group of the 50 happiest countries. Notably, several countries with relatively low consumption levels display markedly high happiness outcomes, highlighting the importance of non-material factors such as social support, freedom, and institutional quality in influencing happiness. These findings suggest a need for policy frameworks that go beyond income and consumption to promote comprehensive well-being in a country.