Impact of Innovation on Happiness

This study examines the relation between national innovation and national happiness using cross-sectional data from 127 countries. Innovation is measured by the Innovation Output Sub-Index from the Global Innovation Index, whereas happiness is proxied by the Ladder Score in the 2024 World Happiness Report. To address potential endogeneity, we apply two-stage least squares estimation, using the Innovation Input Index as an instrument. The results suggest that innovation has a significant positive effect on happiness, particularly in countries with lower GDP per capita. However, the marginal benefit declines as income rises, becoming negligible or even negative beyond a GDP per capita of approximately USD 62,500. These findings suggest that innovation’s impact on national happiness varies systematically with economic development, with stronger effects observed in lower-income countries. This study contributes to the economics of happiness by identifying income-based heterogeneity in the innovation–happiness link and offering relevant policy insights.