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Authors:

• Yi Lu
  The University of Hong Kong

• Ben Li
  University of Colorado at Boulder

This paper examines the impact of overall happiness of citizens on economic growth across countries. We first document a robust positive correlation between overall happiness level and economic growth across countries, and then exploit the variation in sex imbalance, a factor that impedes normal mating and thus causes unhappiness, to instrument happiness and identify its causal impact on economic growth. Our results show that happiness has a positive causal effect on economic growth. Other things being equal, a one-standard-deviation increase in happiness raises growth rate by approximately two percentage points. In addition, we find that life expectancy and investment ratio are two possible channels through which happiness works.