The Impact of Environmental Quality on Quality of Life: Evidence from Developed and Developing OECD Countries

Studies of quality of life have developed into a major field of academic research that examines the determinants of subjective well-being beyond traditional economic measures. The link between environmental quality and quality of life (also known as subjective well-being, usually measured by happiness) has been studied in different settings. However, the heterogeneity of the levels of development and of the policy settings in OECD countries offer an interesting environment to study this relationship. This study is the first to offer a complete analysis of the environmental quality–quality of life nexus across OECD member nations, with a special focus on developmental differences within the organization. We analyzed 38 OECD nations using panel data methods for the period 2010–2022, and also classify them into developed and developing subgroups according to income thresholds and United Nations development classifications. Our findings suggest a positive and significant correlation between environment quality (as evaluated by the Environmental Performance Index (EPI)) and subjective quality of life in developed OECD countries. However, this association was statistically insignificant in developing OECD countries, where economic concerns like unemployment and inflation have a more prominent influence on quality of life. Specifically, a 10-point increase in the EPI is associated with a 0.24-point increase in quality of life in developed OECD countries—an effect comparable to a one-percentage-point reduction in unemployment. In contrast, no significant association was found for developing OECD countries. These conclusions have substantial implications for the design of differentiated environmental policies in the OECD framework, and add to the broader knowledge of how sustainable development increases well-being at different phases of economic progress.