The Study of Nonlinear Effects of Government Size on Happiness in Developing and Developed Countries by the Threshold Approach

Abstract

Extended AbstractIntroduction: One of the most important goals of today's societies is to achieve a happy society, a society where the happiness of its people will improve the quality of life and labor productivity, will boost economic growth and, ultimately, will lead to sustainable development. In this regard, government expenditures and the amount of government intervention in the economy can affect the level of happiness of the society. The economics of happiness addresses issues, such as measuring and analyzing prosperity, quality of life, life satisfaction, and the simultaneous growth of indicators of life in a person, family or community with indicators of psychology, health and sociology. The "happiness economics" is a relatively new area in the economy, which in recent years has become a major contributor to the policy equation of many countries. The relationship between happiness and government activities could be an interesting subject for researchers and policy makers. Government with its expenditures and its interventions in the economy may affect happiness of people. Therefore, the main objective of this paper was to examine the effect of government size on happiness in the selected developing and developed countries. Due to the differences between government efficiency in the countries, the results may be different in these two groups ofcountries. Method:The methodology of this research is based on the econometrics methodology. Based on the theories existing in the literature and the previous studies, the econometric model was determined and then inferential statistics was used to explore the research hypotheses. A threshold panel model was estimated by modeling the factors affecting happiness, with emphasis on the effect of government size, for the two selected groups of countries. The threshold panel model is a model in which a predetermined predicted behavior starts to change after a threshold value. In this paper, the size of the government was the threshold variable, which divided the size of government into large and small size governments. Then, the effect of the size of government in both large and small governments on happiness was estimated and the threshold government size was estimated by the model over the period of 2005-2016.