Does happiness transfer economic growth spillovers through democracy?

Ramin Amani, Abbas Assari Arani, Almas Heshmati and Lotfali Agheli

International Journal of Happiness and Development, 2026, vol. 10, issue 2, 172-202

Abstract: This paper investigates whether happiness generates growth spillovers through democracy. Using a panel of 100 countries from 2013 to 2024, we construct a democracy-based weight matrix capturing institutional proximity. Estimating a Spatial Durbin Panel Data model, we decompose growth determinants into direct (within-country) and indirect (spillover) effects. Results show that higher happiness is associated with higher domestic growth and positive spillovers to institutionally proximate democracies. These findings are robust to standard controls and an alternative geographic matrix. However, spillovers are larger and more precisely estimated when countries are linked by democracy rather than physical distance. Spillovers are strongest among democratic and intermediate regimes and weak in non-democracies, underscoring institutional quality's role in mediating international diffusion. The paper shows that promoting subjective well-being and democratic governance can generate more inclusive development than focusing on material growth alone.

Keywords: happiness; economic growth; spatial econometrics; democratic governance; growth spillovers; institutional proximity; democracy weight matrix; spatial Durbin model; well-being economics. (search for similar items in EconPapers)
Date: 2026
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