A note on interdependent happiness

Based on two models of interdependent utilities [Becker, G., 1974. A theory of social interaction, Journal of Political Economy 82, 1064-1093; Fehr, E., Schmidt, K., 1999. A theory of fairness, competition, and cooperation, Quarterly Journal of Economics 114, 817-868] we derive a functional relationship between average happiness and the standard deviation of happiness within a country. This hypothesis is supported by an empirical investigation of 71 countries which shows that the average happiness in these countries depends only on income and on the standard deviation of happiness σ. The latter may be partly based on influences beyond income, for which no data are available. Income has the expected positive influence and σ has the expected negative influence, i.e. large differences in “autonomous” happiness have a dampening influence on “effective” happiness which also takes into account the happiness of others.