1 Environmental versus Social Externalities and Life Satisfaction : A Cross - Country Investigation

Using recent cross-country data for 135 nations, this paper examines the determinants of life satisfaction. The main contribution lies in examining the sensitivity of satisfaction to externalities, both social and environmental. Besides contributing to the literature, the findings also have some implications for public policy. The results show that some factors consistently affect life satisfaction whether or not externalities are considered, while others are sensitive to such considerations. Even under each category of spillovers, the influence on satisfaction varies. Further, other things being the same, satisfaction was lower in transition nations, perhaps signifying that these countries were somehow failing to meet the expectations of their citizens.