Influence of capital elements on happiness in South Africa.

Abstract

Happiness is a universal goal sought after by individuals and policymakers. Most studies on happiness have been conducted in developed countries and have examined life satisfaction primarily from the perspective of financial wealth. However, not many studies have been conducted in developing countries and in the economic context of a broader capital set. Hence, this study investigates the influence of financial, human, and social and spiritual capital on happiness, in the context of South Africa, as a post-apartheid developing economy. South African nationally representative data pertaining to capital elements and individuals’ socio-economic attributes are extracted from the second wave of the National Income Dynamics Study (NIDS), conducted in 2010/2011. The study initially uses Principal Component Analysis (PCA) to measure financial, human, and social and spiritual capital as latent variables. After assessing the reliability of the capital factors and the model fit, a measure for each of the three types of capital is generated based on the PCA results. An ordered probit model is then adopted to determine the influence of the diverse capital elements on happiness, controlling for age, race, gender, employment status, type of region where the individual resides, and the number of children under 7 years of age, who live in the individual’s household. The PCA results show that the financial capital index is closely related to household income per capita, household expenditure per capita, and the ownership of durable assets. The human capital index is strongly linked to literacy in English, educational attainment, and computer literacy, while the social and spiritual capital index is rooted in the relations inside and outside the household, reflected in experiences of violence and crime in the neighbourhood, as well as in trust. The ordered probit regression results indicate that statistically significant positive relationships exist between all capital elements and happiness. Human capital has the strongest relationship with happiness, followed by financial, and social and spiritual capital. Overall, the results suggest that all diverse capital elements can make a difference in enhancing people’s happiness.