Economic crises and happiness: Empirical insights from 134 countries (2008–2019)

Abstract

<p>This study examines the relationship between economic crises and subjective well-being, measured as happiness, using a balanced panel of 134 countries from 2008 to 2019. It identifies and differentiates three main types of crises—banking, currency, and sovereign debt—to capture the heterogeneous mechanisms through which macroeconomic shocks influence everyday life. Drawing on an extensive range of socio-economic, political, and demographic covariates, the analysis employs fixed-effects models and incorporates lagged variables, ensuring careful consideration of temporal dynamics. Additional robustness checks, including alternative dependent variables, two-stage least squares, and panel-corrected standard errors, confirm that the results do not hinge on modeling choices. The findings indicate that while economic crises broadly diminish happiness, their intensity, persistence, and immediacy vary by crisis type. Banking and currency crises impose substantial and relatively swift declines in subjective well-being, with banking crises leaving particularly enduring marks. By contrast, sovereign debt crises exhibit weaker and more delayed effects, suggesting that institutional factors, redistributive policies, and differing welfare regimes mediate their long-term impact. The heterogeneity analysis further reveals that developing countries experience more profound and widespread reductions in happiness, underscoring the role of structural inequalities and weaker social protections. The study’s insights inform policies aiming to enhance resilience, foster inclusive growth, and safeguard well-being amid economic volatility.<br></p>