The impact of fiscal policy on economic happiness: evidence from the countries of the MENA region

Abstract

Purpose The purpose of this study is to investigate the relationship between fiscal policy (tax revenues and government expenditure) and economic happiness. The panel data are used from 2012 to 2016 for 18 countries of the Middle East and North Africa (MENA) region. Design/methodology/approach The study adopted the Barro (1990) model of endogeneity growth to characterize the relationship between fiscal policy and economic happiness. The study estimated the model by using the pooled ordinary least squares method, the fixed effects method and the random-effects method. In addition, the study used the dynamic estimate of this relationship rather than the conventional static estimate through the generalized method of moments’ method. This leads to overcoming the endogeneity problem between the dependent variable and the independent variables. Findings The main findings indicated that there is a negative and statistically significant relationship between nondistortionary taxes and economic happiness. Also, there is no relationship between public expenditure and economic happiness, whether productive or nonproductive. The results confirmed a positive and significant relationship between other revenues and economic happiness. The current study recommended the diversification of other public revenue sources to increase its contribution to public expenditure financing and the restructuring of the tax system, particularly nondistortionary taxes. These taxes must be replaced by other revenues or by distortionary taxes to increase economic happiness. Research limitations/implications The research represents a strong starting base that can help researchers to conduct more studies on economic happiness by using different measures and comparing their results to find out the determinants of happiness. The relationship between economic happiness and fiscal policy with its different aspects requires more studies, especially the relationship between taxes and economic happiness in our region. The study of the relationship between public expenditure and economic happiness according to economic activities can guide decision-makers to direct the expenditure toward economic activities that achieve the happiness of their citizens. Enriching this study requires the availability of fiscal data for the entire MENA region for longer periods, which allow us to divide the countries of the region into petroleum and nonpetroleum countries, but the scarcity of data is one of the limitations of the study. Practical implications The governments of MENA countries should diversify other public revenue sources to increase the financing public expenditure by the expense of tax revenues, especially nondistortionary taxes, which would increase the economic happiness of their citizens. Originality/value This study is one of the rare studies that investigate the relationship between fiscal policy and economic happiness at the global level. This study contributed to filling the gap of this issue in the MENA region and enriching global literature through the experience of the MENA region. Moreover, this study investigated all aspects of fiscal policy, in contrast to other studies that focused on one of its aspects. The weakness in these studies is because of the lack of correlation between the sources of revenues and the face of their spending.

Bigger or better? The effect of public spending on happiness in Africa

“…The coefficient on public expenditure is not significant, confirming the results of Ram (2009) and Rizkallah (2021), who found no relationship between public spending and Happiness. There are good reasons therefore to expect the effect of government spending on happiness to be visible, according to the sector of spending (e.g.…”

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Emotional wage, happiness at work and organisational justice as triggers for happiness management

“…, 2019b). Despite this cognitive finding, there needs to be more solid work in recent literature that clearly states that a corporate culture focused on the subjective well-being of its employees is an essential source of economic profitability for companies (Rizkallah, 2021).…”

“…It means that happiness at work becomes an intangible resource that plays a vital role in the competitiveness of organisations in today's digital society (Ravina-Ripoll et al, 2019b). Despite this cognitive finding, there needs to be more solid work in recent literature that clearly states that a corporate culture focused on the subjective well-being of its employees is an essential source of economic profitability for companies (Rizkallah, 2021).…”

“…In this way, some light can be shed on the mediating role that happiness at work plays in the relationship between emotional wage and organisational justice. Drawing on the recent literature on happiness management (Rizkallah, 2021), the authors of this paper formulate the following four study hypotheses: The theoretical model shown in Figure 1 is proposed based on these research hypotheses.…”