Life Satisfaction and Keeping up with Other Countries

Micro income studies show that relative income of individuals�with respect to their colleagues, friends, etc.�affects their life satisfaction significantly. This paper attempts to extend these studies by using the idea that people may compare their well-beings not only to well-beings of their home country folks but also to well-beings of other country citizens. To test this hypothesis, we form several different country groups that a country may compare itself to and also use several relative deprivation measures. Using data from national surveys of 55 countries carried out from 1973 to 2011, we find that average life satisfaction of a country is significantly affected from how much the country is deprived compared to richer countries in the world. Furthermore, per capita income of country only matters as far as it affects the country�s relative position in the global income distribution. This result, gaining statistical significance after 1990s, is a potential explanation for the paradox that even though richer countries tend to be happier compared to poor ones, a country does not necessarily get happier as its income increases.