Happiness No Matter the Cost? An Examination on How Efficiently Individuals Reach Their Happiness Levels

Happiness measures, reflecting individuals’ well-being, have received increasing attention by policy makers. Policies could
target absolute happiness levels when aiming at increasing a society’s well-being. But given upper bounds of happiness measures,
as well as the possibilities of decreasing returns to happiness resources, we argue that an important measure of interest
is the efficiency with which individuals convert their resources into happiness. In order to examine the effects of policies
on this efficiency and to better understand the trajectories of human well-being over time, we suggest an efficiency measure
that is calculated via a nonparametric order-m approach borrowed from the production efficiency literature. Our approach is exemplified using micro level data from the
British Household Panel Survey (BHPS). Between 20 and 27% of the British populace are efficient in attaining happiness during
our sample period. A negative influence on “happiness efficiency” is being unemployed while a positive influence is cohabitation
with a partner. Our results are robust with respect to using a more comprehensive subjective well-being measure, but there
are gender differences, for example in the (positive) influence that retirement has on males’ efficiency, or the (positive)
influence of maternity leave on females.