We find strong evidence for the importance of both income and social context variables
in explaining differences in well-being. For most specifications tested, the combined
effects of a few measures of the social and institutional context exceed that of income in
equations explaining international differences in life satisfaction. Calculation of
compensating differentials also reveals large income-equivalent values for improvements
in the social context, with much of this value flowing via positive national spillover
effects for key social variables.
Improvements in factors such as corruption, freedom, friends to count on, care and helping others, importance of religion can go a long way in improving human well-being.