Does Happiness Affect the Bilateral Aid Flows Between Donor and Recipient Countries?

The literature on the economics of well-being and happiness is currently growing at a remarkable rate. In separate studies, happiness has been linked to income, health, age, political and economic freedom, unemployment, inflation, self-employment, voluntary work, marriage, and even watching television. None of these studies have linked happiness to foreign aid disbursements. Using data from the Organisation for Economic Co-operation and Development, the World Bank and the World Database of Happiness, we construct an empirical model of aid, in which a host of donor interest and recipient need motives impact on the level of assistance a donor country gives. However, unlike other studies of aid, we concentrate on three factors in donor aid disbursement: the degree of happiness of the donor and the recipient; geographical proximity between the two countries; and competition between donors in providing aid. Using a number of different specifications, we test, in particular, the validity of the hypothesis that donor and recipient happiness are important determinants of levels of aid.