Subjective well-being and regional productivity in the European Union

Abstract

In this study, we examine the relationship between total factor productivity (TFP) and subjective well-being (SWB) in European regions. Using OLS and Lewbel IV estimators, we find a significant and positive effect of SWB on TFP. On average, regions that score 1-point higher on SWB report 19% higher TFP levels. Since TFP is an important driver of economic growth, these findings indicate that promoting SWB will benefit economic growth at the regional level.