Abstract

The purpose of the study is to analyze the effect of income, health, education, and social capital on happiness in Indonesia. The data was taken from National Survey of Social Economic conducted by National Bureau of Statistics of Indonesia in 2012. Ordered probit model was used as estimation technique due to ordinal dependent variable and normal distribution of error assumption. The findings show happiness is affected by absolute income, physical perceived health status, mental health, medium and high level of education, trust in leader, participation on society’s activities, tolerance, and help for and from others. However relative income, gender, household head, junior high school, and trust to neighbors do not have significant effect on happiness. Easterlin paradox does not exist in Indonesia because income has positive impact on happiness. Satisfaction on works, financial, family harmony, and leisure time also have significant effect on happiness. Satisfaction on family harmony is the most important factor than others. From demographic variables, it was known that happiness is not different across gender, household head, and low education people. People who are married, live in urban areas, live outside Java and Bali islands, and have more children are found happier. Happiness-age relationship indicates U-shaped curve. Happiness tends to decrease over time until people reach 51 years old. For all three level of happiness, some predictors do not have significant marginal effect on happiness namely relative income, gender, low education level, and trust to neighbors. Meanwhile the variables of household head and number of infant are not robust. 

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