What Makes People Happy with their Lives in Developing Countries? Evidence from Large-Scale Longitudinal Data on Ghana

A key objective of development thought is to improve the welfare of people and enhance their satisfaction with life. This is important following literature that suggests that increasing incomes may not necessarily lead to happiness in the long term. In this regard, this study investigates the drivers of happiness in Ghana and the determinants of transitions into different happiness states. Using a nationwide panel dataset over three time periods and employing econometric techniques, the study found that among the key determinants of happiness in Ghana are assets, social capital/networks, health status, ethnicity, age and location of residence. The study further found that assets neutralize the effects of other vital drivers while social network has a moderating effect on how assets predict happiness. In contrast, an inverted U-shape was found for the importance of assets to happiness over one’s age, suggesting that assets begin to matter less for one’s happiness beyond a certain age threshold. Aside from assets and social network, which predict transitions from any state of happiness to the other, the importance of other correlates of the transitions largely varies by the initial state of happiness. The implications are discussed within the framework of the goals of development policy.