Can policy make us happier? Individual characteristics, socio-economic factors and life satisfaction in Central and Eastern Europe

Abstract

Rapid economic convergence in Central and Eastern European (CEE) countries has not been matched by a similarly rapid increase in life satisfaction. This paper sets out to address this conundrum, by looking at the individual and macro-level determinants of individual life satisfaction in 10 CEE countries. The results highlight that macroeconomic and institutional differences are the key factors behind the lack of convergence in life satisfaction. On the macroeconomic side, Gross Domestic Product growth is still a source of increasing well-being, but the happiness bonus associated with it is becoming smaller. The different levels of individual happiness in CEE are therefore mostly determined by institutional factors such as corruption, government spending and decentralization.