Happiness and Public Spending : The Impact of Government Expenditure Composition on Life Satisfaction

This thesis adopts a multidimensional approach to studying the composition of public expenditure and its association with subjective well-being across 25 EU countries from 2004 to 2016. Using a balanced panel dataset, the analysis investigates how total level of public spending, its different subcategories and smaller subcomponents relate to the share of individuals reporting high life satisfaction. The results reveal that aggregate government spending is not robustly associated with higher life satisfaction, and in some cases, the association is negative. By disaggregating spending, more informative patterns emerge: social protection expenditure—particularly on old age, survivors, and social exclusion—shows consistent negative associations with well-being. Certain components of education and public order and safety also demonstrate statistically significant effects. Robustness tests confirm the stability of these key findings. The thesis addresses econometric challenges, including endogeneity and complexity in modelling disaggregated expenditure, and concludes by emphasizing the importance of examining budget composition rather than size alone when assessing the welfare impact of public policy.

Grantor dc:publisher

Helsingin yliopisto

Year dc:date.issued

2025

Author dc:creator

• Hiltunen, Tatu

• Happiness
• Life Satisfaction
• Public Spending

Statement dc:rights

• CC BY 4.0

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/10138/597386

OAI identifier oai:identifier

oai:helda.helsinki.fi:10138/597386