WELL-BEING AND SOCIOECONOMIC FACTORS: EVIDENCE FROM THE EUROPEAN UNION

Since 2013, March 20 has been recognized as World Happiness Day by the United Nations, emphasizing the significance of well-being beyond purely economic considerations. While traditional economic and social indicators provide valuable insights, a comprehensive approach to measuring happiness requires a broader set of socioeconomic variables. However, many existing studies overlook endogeneity issues in panel data analysis. This study addresses this gap by employing a Panel Vector Autoregressive model, which treats all variables as endogenous, allowing for the identification of bidirectional relationships, path dependencies, and potential virtuous circles. Economic factors remain central to well-being, with numerous studies confirming a positive correlation between happiness and GDP per capita. Furthermore, governance quality plays a crucial role, encompassing democratic participation, freedom of expression, government effectiveness, the rule of law, and corruption control, all of which contribute to overall life satisfaction. Beyond economic and governance aspects, environmental sustainability has emerged as a critical determinant of happiness, particularly in developed nations. Climate change and environmental degradation have severe socioeconomic consequences that negatively impact well-being. Additionally, cultural factors such as gender equality, could significantly influence happiness by fostering economic growth and social stability. This study conducts an empirical analysis using panel data from 27 EU countries spanning the years 2011 to 2023, offering new insights into the determinants of well-being and their policy implications. The analysis reveals that both well-being and GDP are pathdependent, with rising GDP contributing to greater happiness. Institutional quality enhances both life satisfaction and economic development, while lower CO₂ emissions similarly exert a positive effect on both outcomes. Institutional quality and environmental factors are closely interlinked: improved governance helps reduce emissions, while increasing emissions can prompt institutional responses. An enhancement in overall life satisfaction—frequently associated with increased job fulfilment and higher productivity—tends to exert a positive influence on average per capita income. Higher gender inequality diminishes happiness. Gender equality is also associated with lower emissions, suggesting that greater female participation supports sustainable development. However, some findings are unexpected: GDP growth does not necessarily lead to reduced emissions or improved institutional quality, and stronger institutions do not directly alleviate gender inequality. These complexities highlight the 16 need for further research that accounts for contextual factors, time lags, and sample heterogeneity.