Ka iuki, Ca oline Wanji u; Ka anu, Jeni e Wai imu
A icle
The ela ionship be ween happiness and o eign di ec
in es men in A ican coun ies
Economies
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Sugges ed Ci a ion: Ka iuki, Ca oline Wanji u; Ka anu, Jeni e Wai imu (2024) : The ela ionship
be ween happiness and o eign di ec in es men in A ican coun ies, Economies, ISSN 2227-7099,
MDPI, Basel, Vol. 12, Iss. 12, pp. 1-12,
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Ci a ion: Ka iuki, Ca oline Wanji u,
and Jeni e Wai imu Ka anu. 2024.
The Rela ionship Be ween Happiness
and Fo eign Di ec In es men in
A ican Coun ies. Economies 12: 343.
h ps://doi.o g/10.3390/
economies12120343
Academic Edi o : Lau a Resmini
Recei ed: 8 Augus 2024
Re ised: 17 No embe 2024
Accep ed: 4 Decembe 2024
Published: 15 Decembe 2024
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4.0/).
A icle
The Rela ionship Be ween Happiness and Fo eign Di ec
In es men in A ican Coun ies
Ca oline Wanji u Ka iuki 1,* and Jeni e Wai imu Ka anu 2
1Ins i u e o Ma hema ical Sciences, S a hmo e Uni e si y, Nai obi P.O. Box 59857-00200, Kenya
2Independen Resea che , Kise ian P.O. Box 60-00206, Kenya; [email p o ec ed]
*Co espondence: cwka iuki@s a hmo e.edu
Abs ac : This esea ch looks in o he ela ionship be ween happiness and o eign di ec in es men
(FDI) in A ican coun ies so as o shed ligh on whe he o no he inwa d FDI s ock in A ican
coun ies has an in luence on happiness in he egion. The s udy u ilises annual panel da a om 2006
o 2022 o 46 A ican coun ies and uses he Can il li e ladde da a as a measu e o happiness. The
indings om his esea ch e eal ha he e is a posi i e bu s a is ically insigni ican ela ionship
be ween inwa d FDI s ock and happiness in A ica. The esul s sugges ha FDI alone does no
di ec ly con ibu e o economic de elopmen in A ican coun ies, bu a he he bene i s o FDI
may be con ingen on o he ac o s in he coun y. None heless, he posi i e ela ionship obse ed
p o ides a ounda ion o policymake s o encou age FDI, as i has he po en ial o imp o e happiness
le els in A ican na ions. Addi ionally, he esul s om his s udy show ha he le el o happiness in
he p e ious yea and social suppo ha e a posi i e and s a is ically signi ican e ec on happiness
in A ican coun ies.
Keywo ds: happiness; o eign di ec in es men ; A ica; panel da a; sys em GMM
1. In oduc ion
1.1. Backg ound on Happiness
The G eek Philosophe A is o le pu o wa d in his w i ings ha he ul ima e goal o
human exis ence is happiness (Pu sui o Happiness 2024). Happiness may be desc ibed
as a sense o wellbeing o con en men wi h one’s quali y o li e (Veenho en 2012). Hap-
piness has bo h a ec i e and cogni i e elemen s. While he cogni i e aspec ela es o
li e sa is ac ion based on an indi idual’s s anda ds, he a ec i e elemen , o en known as
he emo ional componen , e e s o he balance be ween pleasan and unpleasan eelings
(Diene e al. 2009). Happiness can be assessed h ough sel - epo ing a bo h he g oup and
indi idual le el. The e is no sole de e minan o happiness, bu some habi s a e linked o
happiness. These include cul i a ing social ela ionships; p ac ising kindness, o gi eness,
and spi i uali y; wo king owa ds genuine goals; exe cising; and medi a ing (as ci ed in
Fishe 2010).
Wi h ega d o compu ing happiness o a popula ion, he G oss Na ional Happiness
(GNH) Index was concep ualised by King Jigme Singye Wangchuck o Bhu an in he ea ly
1970s. The GNH index has nine domains: heal h, educa ion, go e nance, communi y i al-
i y, good go e nance, ime use, cul u al di e si y and esilience, psychological wellbeing,
and ecological di e si y and esilience. I ca ego ises people as unhappy, na owly happy,
ex ensi ely happy, and deeply happy (Ox o d Po e y & Human De elopmen Ini ia i e
(OPHI) 2024). The GNH index was designed o be e ep esen he gene al wellbeing o
he people o Bhu an a he han elying on a mone a y indica o , such as G oss Domes ic
P oduc (GDP). I has been a gued ha GDP, which es ima es he esou ces a ailable o he
a e age pe son o achie e hei goals, is a poo measu e o wellbeing because i does no
ake in o conside a ion he alue o he p oduc ion by-p oduc s. These include posi i e
Economies 2024,12, 343. h ps://doi.o g/10.3390/economies12120343 h ps://www.mdpi.com/jou nal/economies
Economies 2024,12, 343 2 o 12
and nega i e ex e nali ies such as in as uc u al imp o emen and pollu ion, espec i ely.
Mo eo e , GDP unde es ima es he alue o he ci izens’ wo k, o example, he unpaid
labou o s ay-a -home pa ne s (Ai ken 2019). Al hough he GNH index is only a ailable
o Bhu an, he e a e measu es ha ha e been inspi ed by he GNH index such as he Wo ld
Happiness Repo , he O ganiza ion o Economic Coope a ion and De elopmen (OECD)
Be e Li e Index, and he Happy Plane Index. Mo eo e , in 2012, he Uni ed Na ions held
a mee ing o encou age he sp ead o Bhu an’s GNH philosophy, and in ha same yea ,
he 20 h o Ma ch was decla ed o be he In e na ional Day o Happiness by he Uni ed
Na ions (Ac ion o Happiness 2021).
A mo e widely a ailable measu e o happiness o a majo i y o coun ies is a ailable
om he Gallup Wo ld Poll. The poll gene ally measu es indi iduals’ a i udes owa ds
no able ma e s in hei coun y such as GDP pe capi a, heal hy li e expec ancy, gene osi y,
eedom, social suppo , and pe cep ions o co up ion. The su ey uses a sample size o
a ound 1000 o 2000 indi iduals in la ge coun ies such as Russia and China (Helliwell
e al. 2024). Fu he , he poll adop s he Can il li e ladde su ey ques ion. The ques ion is
wo ded as “Please imagine a ladde , wi h s eps numbe ed om 0 a he bo om o 10 a he
op. The op o he ladde ep esen s he bes possible li e o you and he bo om o he
ladde ep esen s he wo s possible li e o you. On which s ep o he ladde would you
say you pe sonally eel you s and a his ime?” (Helliwell e al. 2024).
1.2. Happiness and Fo eign Di ec In es men in A ica
The Wo ld Happiness Repo , which has been published since 2012, indica es ha
compa ed o o he egions o he wo ld, A ica has lowe le els o happiness. Fo example,
in 2017, he a e age happiness le els we e below a e age o o e ou in i e A ican
coun ies (Helliwell e al. 2017). In 2022, he a e age le el o happiness based on 32 coun ies
in A ica was 4.39 poin s, while he a e age le el o happiness globally was 5.54 poin s
using da a om 134 coun ies (The Global Economy 2024). Un o una ely, hese indings
poin a A ican ci izens being less sa is ied wi h hei quali y o li e, a condi ion ha
should be imp o ed upon so as o gi e indi iduals he chance o lead be e and mo e
ul illed li es.
O e he yea s, A ican coun ies ha e con inued o pu sue FDI since i esul s in
inc eased employmen , consume choice, ans e o capi al, new echnology, managemen
skills, access o in e na ional ma ke s, and economic g ow h (Gionea 2005). The bene i s
ob ained om FDI in lows would be aluable in helping A ican coun ies achie e highe
le els o li ing, leading o inc eased sus enance, sel -es eem, and eedom o choice. This
would ul ima ely inc ease he le el o happiness o people li ing in he con inen . Mo e-
o e , Ama ya Sen’s Capabili y App oach highligh s ha ue de elopmen and wellbeing
o indi iduals depend on inc easing hei capabili ies. In hei book, Toda o and Smi h
(2020) explain ha capabili ies as de ined by Sen a e he “ eedoms ha people ha e, gi en
hei pe sonal ea u es and hei command o e commodi ies” (p. 12). The S an o d Ency-
clopedia o Philosophy (2024) desc ibes capabili ies as he ac ions and hings ha one can
accomplish i hey so choose. Fo example, being able o a ain an educa ion, being well
nou ished, and being able o pa icipa e in communi y li e. In his esea ch, we pu o wa d
ha FDI has he po en ial o inc ease people’s capabili ies. This is because he bene i s
p o ided by FDI such as inc eased employmen , economic g ow h, new echnology, and
access o in e na ional ma ke s p o ide indi iduals wi h he eedoms o achie e such
hings like being educa ed, being heal hy, ha ing decen housing, and ha ing access o
economic oppo uni ies. As such, by enhancing people’s eedom o a ain wha hey alue,
FDI is likely o imp o e hei happiness.
Addi ionally, pas s udies such as S e enson and Wol e s (2013) ha e ound ha
he e is signi ican co ela ion be ween income and happiness ac oss coun ies and o e
ime. When indi iduals ea n a li ing and can a o d hei basic needs, hei happiness
inc eases. Un o una ely, wi hin he A ican con inen , he e a e app oxima ely 534 million
people ha li e in ex eme po e y as hey li e on less han USD 2.15 pe pe son, pe day
Economies 2024,12, 343 3 o 12
(Uni ed Na ions De elopmen P og amme and Ox o d Po e y and Human De elopmen
Ini ia i e 2023). Inc eased incomes, which would lead o inc eased happiness, a e needed
o indi iduals li ing in he con inen , and FDI could p o ide an oppo uni y o highe
incomes. Howe e , i should be no ed ha he ela ionship be ween income and happiness
inc eases a a dec easing a e. Mo eo e , a e a high enough le el o income is eached,
when people a e ela i ely well nou ished, heal hy and educa ed, happiness is no highe
on a e age wi h highe income (Toda o and Smi h 2020).
In 2022, A ica ecei ed 3.5% o he global inwa d FDI lows, which we e alued a
USD 45 billion. Speci ically, in 2022, FDI in lows o No he n A ica we e USD 15 billion,
while hose o Sou he n A ica we e alued a USD 7 billion. Wes A ica ecei ed FDI
in lows wo h USD 8 billion, Eas A ica ecei ed FDI in lows amoun ing o USD 9 billion,
while FDI in lows o Cen al A ica o alled USD 6 billion (UNCTAD Wo ld In es men
Repo 2024). In 2023, No he n A ica had he highes FDI s ock
1
in he con inen alued
a USD 355 billion, ollowed by Wes e n A ica, which had a alue o USD 211 billion.
In Eas e n A ica, he alue was USD 196 billion, and Sou he n A ica had a alue o
USD 140 billion, while Cen al A ica had he lowes FDI s ock alued a USD 134 billion
(UNCTAD Da a Cen e 2024). In he con ex o he sou ce o FDI, Eu opean in es o s a e he
la ges holde s o FDI s ock in he A ican con inen . Speci ically, he Uni ed Kingdom has
an FDI s ock alued a USD 60 billion, while F ance and he Ne he lands each ha e an FDI
s ock wi h a alue o USD 54 billion. Wi hin he con inen , in a egional in es men s ha e
inc eased o e he las i e yea s bu s ill emain qui e small in compa ison o in es men s
coming om ou side o he con inen (UNCTAD Wo ld In es men Repo 2024).
Gi en he inc easing FDI s ock in he A ican con inen , i would be aluable o look
in o he e ec ha FDI has on he o e all le el o happiness, an indica o o economic
de elopmen . Fo example, esea ch ca ied ou by Kanwe i (2015) ound ha a he
global le el, inwa d FDI is posi i ely co ela ed wi h he le el o happiness in a coun y.
Howe e , he s udy u he indica es ha he ela ionship be ween FDI and happiness is no
signi ican o middle income and low-income coun ies. The esea ch by Kanwe i (2015)
u ilised da a om a ious coun ies ac oss he wo ld, including only 14 A ican coun ies.
Howe e , ou s udy speci ically examines he e ec o FDI on happiness using da a om
46 A ican coun ies. Focusing only on he ela ionship be ween FDI and happiness in
A ican coun ies will shed ligh on any di e ences o simila i ies ha hese A ican na ions
migh sha e wi h coun ies in o he egions ac oss he globe. Addi ionally, his s udy
con ols o he ela ionship be ween happiness and o he ac o s such as income pe capi a,
social suppo , li e expec ancy, educa ion, go e nance, and he COVID-19 pandemic. As a
measu e o happiness in A ican coun ies, his esea ch used he Can il li e ladde 2da a
om he Gallup Wo ld Poll, while FDI was measu ed using he na u al log o o eign di ec
in es men s ocks in USD. Addi ionally, o obus ness, we also used da a om he Happy
Plane Index3as a measu e o happiness in A ican coun ies.
This s udy is impo an o policymake s and esea che s as i enables a deepe unde -
s anding o how happiness, a measu e o wellbeing and sa is ac ion wi h one’s quali y o
li e, is in luenced by he FDI s ock in A ica. Mo eo e , a posi i e ela ionship be ween
happiness and FDI would p o ide policymake s wi h a s onge basis o encou age he
o e all agenda o egional in eg a ion ac oss he con inen as his ends o b ing wi h i
inc eased in a- egional FDI, which would e en ually lead o highe le els o happiness o
A ican ci izens.
2. Re iew o Rela ed Li e a u e
2.1. Happiness and Fo eign Di ec In es men
Pas s udies on he ela ionship be ween happiness and FDI show ha FDI in luences
happiness bo h di ec ly and indi ec ly ( h ough ac o s such as GDP and unemploymen )
and ha he na u e o he impac a ies ac oss egions. Fo example, a s udy by Kanwe i
(2015) ound ha globally, inwa d FDI had a signi ican and posi i e e ec on happiness.
Ou wa d FDI also had a posi i e e ec on happiness, hough he e ec was no s a is ically
Economies 2024,12, 343 4 o 12
signi ican . Fu he , he impac o FDI on happiness a ied depending on he income le els
o he a ious coun ies. Speci ically, he s udy by Kanwe i (2015) ound a signi ican and
di ec ela ionship be ween FDI and he happiness o high-income OECD and high-income
non-OECD, No h Ame ican, Asian and A ican coun ies. Howe e , his di ec associa ion
was no ound in he low-income and lowe - and uppe -middle income Eu opean and
Sou h Ame ican coun ies.
In o he esea ch, Pi eli (2017) epo ed mixed e idence on he po en ial bene i s
o inwa d FDI lows, sugges ing ha he hypo hesised posi i e impac o FDI in lows
seems o be dependen on se e al ac o s, including he ins i u ional en i onmen , human
capi al endowmen s, and he abso p i e capaci y o hos coun ies. This may p o ide some
insigh s as o why he esea ch by Kanwe i (2015) did no ind a co ela ion be ween FDI
and happiness in he low-income and lowe - and uppe -middle-income Eu opean and
Sou h Ame ican coun ies.
2.2. Happiness and Income
Richa d Eas e lin, a e whom he ”Eas e lin pa adox” was coined, was among he
i s o conduc empi ical esea ch on he happiness–income ela ionship. In 2001, Eas e lin
conduc ed a su ey and ound ha , while happiness inc eases as income inc eases, his
e ec only las s up o a ce ain le el, beyond which he addi ional gain in happiness begins
o decline, bo h among and wi hin coun ies. This was named he ”Eas e lin pa adox”.
Acco ding o his pa adox, hose ea ning a high income a e happie han hose ea ning
a low income, bu o e he li e cycle, despi e signi ican income gain, happiness emains
cons an . The e o e, he implies ha people a e happy i hey ea n enough o mee hei
basic needs.
La e , S e enson and Wol e s (2013) eassessed he Eas e lin pa adox and es ablished
ha he e is no ixed poin o sa ia ion o bo h weal hy and low-income indi iduals and
na ions. They also ound ha he happiness–income ela ionship is app oxima ely log
linea , such ha a highe inc ease in happiness is co ela ed wi h each addi ional uni
(USD) o income o he low-income ea ne s han o he high-income ea ne s. Simila ly,
F ey and S u ze (2002) concluded ha na ional income is signi ican ly linked o o e all
li e sa is ac ion un il a ce ain le el, a e which income ceases o be impo an . Else-
whe e, Sh o yia (2023) a gues ha a e ul illing basic needs, he ole o money does no
necessa ily ansla e o an inc ease in happiness.
2.3. Happiness and Social Fac o s
In addi ion o income, pas esea ch sugges s ha social ac o s such as social suppo ,
educa ion, li e expec ancy, and heal h all ha e an e ec on wellbeing. Fo example, indings
om Chen and Feeley (2014) indica ed ha highe suppo and lowe s ain om a pa ne ,
child en, iends, and amily imp o e wellbeing. Mo e ecen ly, esea ch by Poudel e al.
(2020) e ealed ha adolescen s who pe cei e good social suppo ha e highe sel -es eem,
which in u n con ibu es o hei psychological wellbeing. Addi ionally, bo h boys and
gi ls end o each ou mo e o amily o social suppo compa ed o iends and o he s.
In ela ion o educa ion, esea ch ca ied ou in he U.S. ound ha adul s who ha e
educa ion beyond he high school le el ha e be e heal h and wellbeing ou comes. Addi-
ionally, hese adul s a e mo e likely o ha e jobs ha align wi h hei alen s and in e es s
and end o engage mo e wi h hei communi y (Lumina Founda ion 2023). Howe e , he e
a e also s udies ha ha e ound a nega i e ela ionship be ween educa ion and wellbeing.
Fo example, esea ch using Chinese da a by Wu e al. (2022) shows ha highe educa ion
on a e age is signi ican ly nega i ely co ela ed wi h happiness o people in u ban China.
The au ho s go on o discuss ha indi iduals wi h highe educa ion a e likely o ha e
“accep able” li es a he han “ex emely happy” li es. Speci ically, he s udy highligh s
ha in u ban China, highly educa ed people gene ally ha e mo e unpaid housing deb .
When i comes o li e expec ancy, longi udinal s udies o no mal popula ions show
ha a a ie y o subjec i e wellbeing ac o s, such as he posi i e a ec elemen , can
Economies 2024,12, 343 5 o 12
p edic heal h and longe i y (Diene and Chan 2011). Fu he , when combined wi h
expe imen al esea ch, he case ha subjec i e wellbeing in luences heal h and longe i y in
heal hy popula ions is compelling. Fu he mo e, a s udy by Gimenez e al. (2021) a gues
ha among Chilean senio ci izens, happiness is he mos impo an de e minan o li e
expec ancy.
Poo heal h in gene al is expec ed o ha e a de imen al e ec on happiness. The
ecen COVID-19 pandemic, which a ec ed billions o people and esul ed in millions o
li es being los ac oss he globe, was a ime when many su e ed poo heal h. Howe e ,
acco ding o he Wo ld Happiness Repo (Helliwell e al. 2022), indings show ha COVID-
19 led o only modes changes in he o e all happiness ankings, e lec ing bo h he global
na u e o he pandemic and a widely sha ed esilience in he ace o i . None heless, indings
om he Gallup Wo ld Poll epo ed inc eased equency o s ess among indi iduals in
2020 as a esul o he heigh ened p essu e du ing he pandemic.
2.4. Happiness and Go e nance
The go e nmen also has a c i ical ole o play when i comes o he happiness o
i s ci izens. Fo example, esea ch indings indica e ha hose li ing in No dic coun ies
end o ha e high le els o happiness e en hough hese may no be he wo ld’s weal hies
na ions. Ins ead, hey sco e high in e ms o well- unc ioning democ a ic ins i u ions,
le els o us , mu ual espec , and suppo in socie y. Simila ly, na ions ha ha e low
le els o happiness end o ha e highe le els o co up ion, dis us owa ds o he s in
socie y, and weake ins i u ions (Co o an 2023). In addi ion, esea ch using da a om en
Sou h Ame ican coun ies ound ha e en a e con olling o sociodemog aphic and
mac oeconomic ac o s, he e was a s ong posi i e co ela ion be ween con idence in
na ional ins i u ions and he cu en and expec ed li e sa is ac ion (Macchia and Plagnol
2019).
3. Da a and Me hodology
3.1. Da a
This esea ch used da a om 46
4
ou o he 55 coun ies in he A ican con inen o
in es iga e he ela ionship be ween happiness and FDI in A ican coun ies. Annual panel
da a om 2006 o 2022 we e used in his s udy, as his is when he Can il li e ladde , as well
as he FDI s ock da a, a e a ailable o he 46 A ican coun ies. The dependen a iable
used in his s udy is he Can il li e ladde , which is he measu e o happiness. Da a o he
Can il li e ladde we e ob ained om he 2024 Wo ld Happiness Repo Appendix and
we e calib a ed on a scale o 0 o 10; whe e 0 is e y unhappy and 10 is e y happy. The
main independen a iable o his s udy is he annual FDI s ock da a in USD, which we e
ob ained om he Uni ed Con e ence on T ade and De elopmen (UNCTAD) da a cen e.
The con ol a iables included in his s udy a e social suppo
5
, which is measu ed
as ei he 0 o 1; income, which is measu ed as he na u al log o GDP pe capi a; heal h,
which is measu ed as he heal hy li e expec ancy a bi h; educa ion, which is measu ed
using he Uni ed Na ions De elopmen P og amme (UNDP) educa ion index on a scale
be ween 0 and 1; go e nance index, which is measu ed on a scale be ween
−
2.5 (weak) and
2.5 (s ong); and he COVID-19 pandemic, which is a dummy a iable included o con ol
o he COVID-19 pandemic in he yea s 2020, 2021, and 2022.
Da a o social suppo we e ob ained om he 2024 Wo ld Happiness Repo Ap-
pendix. The educa ion index da a we e ob ained om he Uni ed Na ions De elopmen
P og amme (UNDP), while he income and heal hy li e expec ancy da a we e ob ained
om he Wo ld Bank De elopmen Indica o s da abase. The a iables (i.e., oice and
accoun abili y, poli ical s abili y and absence o iolence/ e o ism, ule o law, egula-
o y quali y, go e nmen e ec i eness, and con ol o co up ion) used o cons uc he
go e nance index we e ob ained om The Wo ld Bank Wo ldwide Go e nance Indica o s
da abase.
Economies 2024,12, 343 6 o 12
3.2. Cons uc ing he Go e nance Index
The se o go e nance indica o s used in cons uc ing he index o his s udy we e
oice and accoun abili y, poli ical s abili y and absence o iolence/ e o ism, ule o law,
go e nmen e ec i eness, con ol o co up ion, and egula o y quali y. The go e nance
index was cons uc ed using he p incipal componen analysis (PCA) me hod, which was
deemed sui able as he indica o s used a e s ongly co ela ed. Go e nance was cap u ed as
an index a he han using he indi idual indica o s so as o p o ide o a mul idimensional
concep ha canno be su icien ly desc ibed by an indi idual indica o . The index anges
om −2.5 o 2.5 such ha highe alues a e ela ed o be e go e nance.
3.3. Me hodology
To es ima e he e ec o FDI s ock on happiness in A ica, he econome ic model
below was used:
Li e ladde i, =k+β1Li e ladde i, −1+β2log FDIi, +β3log GDP pe capi ai,
+β4li e expec ancyi, +β5educa ion indexi, +β6social suppo i,
+β7go e nance indexi, +β8Co id −19i, +εi,
(1)
The subsc ip e e s o he yea s anging om 2006 o 2022, and i e e s o an
indi idual coun y. kis he common in e cep , which is he same o all he c oss-sec ional
coun ies and o e ime.
β1
is he coe icien o he lag o he dependen a iable li e
ladde , which is he measu e o happiness.
β2
is he coe icien o he independen a iable,
log o FDI s ock, and illus a es how much happiness changes when FDI s ock changes by
a pe cen , all else being equal.
β3−β8
ep esen he coe icien s o he con ol a iables,
which a e income pe capi a, li e expec ancy, educa ion, social suppo , go e nance, and
he COVID-19 pandemic.
εi, =ωi+ui
.
ωi
measu es he andom de ia ion be ween each
coun y’s in e cep e m and he common in e cep e m
k
, while
ui
is he esidual e m o
coun y ia ime .
The econome ic model (1) abo e shows ha he li e ladde is in luenced by i s lag,
log o FDI s ock, a se o con ol a iables, and a se o coun y-speci ic e ec s and ime-
ixed e ec s. Hence, his s udy employed he Gene alised Me hods o Momen s (GMM)
echnique o add ess any endogenei y o e e se causali y conce ns. Fo example, he e
migh be a co ela ion be ween eg esso s such as FDI s ock, GDP pe capi a, social suppo ,
and he e o e m. The e could also be e e se causali y because happie popula ions
migh a ac mo e FDI. Speci ically, he sys em GMM was used a he han he di e ence
GMM because, acco ding o Blundell and Bond (1998), he la e p oduces biased and
ine icien es ima es when wo king wi h ini e samples due o he use o poo ins umen s.
Hence, he sys em GMM is p e e ed.
4. Resul s and Discussions
4.1. Summa y S a is ics
Table 1 epo s he summa y s a is ics. The li e ladde a e ages a ound 4.38. This is
lowe han he 5.0 mid-poin o he 0 o 10 ladde . The lowes happiness sco e o e he
pe iod o s udy is 2.56, eco ded in Sie a Leone in 2022, and he highes is 6.35, eco ded in
Alge ia in 2014. On a e age, Mau i ius has he highes happiness sco e a 5.86 ollowed by
Alge ia wi h 5.39, whe eas he leas happy coun y is Cen al A ican Republic, wi h an
a e age sco e o 3.52.
Economies 2024,12, 343 7 o 12
Table 1. Summa y s a is ics.
Va iable Obs. Mean S d. De Min. Max.
Li e ladde 539 4.384 0.664 2.560 6.355
Happy Plane Index (HPI) 536 28.564 8.129 8.3 56.54
FDI inwa d s ock 782 15,539.18 2.30 ×109−7.40 ×1094.07 ×1010
GDP pe capi a 782 2215.609 2498.081 166.276 1576.42
Social suppo 536 0.707 0.116 0.290 0.922
Li e expec ancy 782 60.883 6.586 42.914 77.129
Educa ion index 736 0.457 0.132 0.152 0.769
Go e nance index 782 −1.24 ×10−91.000 −2.344 2.301
COVID-19 782 0.177 0.381 0 1
FDI inwa d s ock (cu en USD) a e ages a ound USD 15.5 billion while a ying
conside ably om USD 9.0 million in Bu undi (2007) o USD 179.5 billion in Sou h A ica
(2010). Va iables ha showed he g ea es a ia ion h oughou he sample as measu ed
by s anda d de ia ion we e FDI and GDP pe capi a. O e he s udy pe iod, he o al
numbe o obse a ions a ies o he a ious a iables, anging om he highes alue a
782 obse a ions eco ded o inwa d FDI s ock, GDP pe capi a, li e expec ancy, and he
go e nance index o 543 obse a ions o he social suppo a iable. The di e ence in he
numbe o obse a ions is a esul o missing da a. As such, he da a we e classi ied as an
unbalanced panel da a se .
4.2. Co ela ion Ma ix
Table 2below epo s he co ela ion coe icien s o all he a iables used in his s udy
and shows ha he co ela ion among he a iables is wi hin he accep able ange.
Table 2. Co ela ion ma ix.
Li e
Ladde
Log o FDI
S ock
Log o GDP
pe Capi a
Social
Suppo
Educa ion
Index
Li e
Expec ancy
(d)Go e nance
Index
(d)COVID-
19
Li e ladde 1.000
Log o FDI 0.395 1.000
Log o GDP
pe capi a 0.440 0.524 1.000
Social suppo 0.3027 0.352 0.389 1.000
Educa ion
index 0.279 0.486 0.739 0.280 1.000
Li e
expec ancy 0.273 0.380 0.518 0.116 0.516 1.000
(d)Go e nance
index −0.048 −0.010 0.037 0.015 0.036 0.069 1.000
(d)COVID-19 0.137 0.141 0.092 −0.010 0.115 0.115 −0.114 1.000
4.3. S a iona i y Tes s
As he s udy u ilised an unbalanced panel da a se , he Fishe - ype es s we e used o
es o he s a iona i y o he a iables. Excep o he go e nance index and he COVID-19
con ol a iable, he esul s showed ha a leas one panel o each a iable examined was
s a iona y a hei le el o ms. The go e nance index and he COVID-19 a iables we e
s a iona y a i s di e ence. Gi en his, he go e nance index and he COVID-19 a iables
we e used a hei i s di e ence, while all he o he a iables in his s udy we e used in
hei le el o ms.
Economies 2024,12, 343 8 o 12
4.4. Model Resul s and Discussion
Table 3below illus a es he e ec o inwa d FDI s ock on happiness in A ica using
he Sys em GMM es ima ion me hod. The model con ols o ac o s including log o
GDP pe capi a, educa ion, li e expec ancy, social suppo , go e nance, and he COVID-19
pandemic.
Table 3. Two-s ep sys em GMM ( obus ) esul s.
Li e Ladde Coe icien and S d. E o
Li e ladde ( −1) 0.439 ***
(0.118)
Log inwa d FDI s ock 0.198
(0.264)
Log GDP pe capi a 0.168
(0.492)
Social suppo 2.613 **
(1.173)
Li e expec ancy 0.001
(0.022)
Educa ion index −1.960
(2.643)
(d)Go e nance index 0.123
(0.117)
(d)COVID-19 0.218 *
(0.123)
Cons an −1.478
(2.673)
p- alue o o e all model 0.000
p- alue o AR(1) 0.001
p- alue o AR(2) 1.000
p- alue o Hansen es 0.578
Dependen a iable is he li e ladde . Robus s anda d e o s (in pa en heses). S a is ical signi icance: *** a he 1%
le el, ** a he 5% le el, * a he 10% le el.
The p- alue o 0.578 om he Hansen es demons a es ha he ins umen s used in
he model we e alid. Addi ionally, gi en he p- alue o 1.000 o he AR (2) es , he s udy
ailed o ejec he null hypo hesis, con i ming ha he model is speci ied co ec ly and ha
he e is no second o de se ial co ela ion.
The s udy no es ha he cu en yea ’s li e ladde sco e is posi i ely in luenced by he
p e ious yea ’s sco e such ha a 1-poin inc ease in he p e ious pe iod’s li e ladde sco e
would inc ease he cu en yea ’s happiness by 0.44 poin s.
Addi ionally, he esul s sugges ha a 1% inc ease in inwa d FDI s ock esul s in a
0.20-poin inc ease in happiness in A ican coun ies, holding all o he ac o s cons an .
Howe e , he esul s indica e ha inwa d FDI does no ha e a s a is ically signi ican impac
on happiness in A ican coun ies a ei he he 90%, 95%, o 99% con idence le el. The e
ha e been mixed indings on he bene i s o inwa d FDI o a ious coun ies, and some posi
ha FDI alone does no su icien ly con ibu e o economic g ow h o de elopmen and hus
may no di ec ly in luence wellbeing. Pi eli (2017) inds his o be condi ional on se e al
ac o s, including he abso p i e capaci y, ins i u ional en i onmen , and human capi al
endowmen s o hos coun ies. In hei s udy, Al a o e al. (2004) ind ha ac o s such as
he le el o inancial ma ke de elopmen could signi ican ly de e mine how coun ies gain
om FDI.
To u he con i m whe he he e is a ela ionship be ween inwa d FDI and happiness
in A ica, his s udy used an al e na i e measu e o happiness, he Happy Plane Index
(HPI). This u he con i med ha a he con inen al le el, he ela ionship be ween inwa d
FDI and happiness is posi i e bu s a is ically insigni ican . The esul s a e shown in
Table A1 in he Appendix A.
