The Pursuit of Happiness in Indonesia

Timotius Hendrik Partohap, S.E.

Department of Economics, School of Economics and Finance,
University of St Andrews, United Kingdom

Abstract
Happiness is something that everybody pursues. Accordingly, the importance of happiness

to be part of economic development measurement arises lately. This paper analyzes factors that

may determine the people’s happiness in Indonesia. Using Ordered Probit Regression model

towards Indonesia Family Life Survey-4 (IFLS-4) published by RAND, it is found that income

is not the only factor that correlated with happiness, but as well as several demographic

variables such as marital status, ethnicity, and education background.

Introduction

Everybody wants to be happy and keep being happier all the time Indeed, to be happy,

everybody tries to hold the key of happiness. Happiness is also regarded as one factor in

pursuing the ultimate goal of life1. The importance of happiness measurement also arises lately.

In 2012, a high level meeting of United Nations was held to discuss about: “Happiness and

Well-Being: Defining a New Economic Paradigm” chaired by the Prime Minister of Bhutan,

which is the first country to use gross national happiness as their main development indicator

instead of gross domestic product. A year after, World Bank published annual world happiness

report and stated:

“The word “happiness” is not used lightly. Happiness is an aspiration of

every human being, and can also be a measure of social progress. America’s

founding fathers declared the inalienable right to pursue happiness. Yet are

1
http://www.lifecoachexpert.co.uk/whyishappinesssoimportant.html

The Pursuit of Happiness in Indonesia | 1 Timotius H.P.

 Americans, or citizens of other countries, happy? If they are not, what if

anything can be done about it?”2

In the view of economics, happiness can be viewed as utility level. Theoretically, utility

level increases as individual consumes more goods and services. Hence, improvement of

income which expands the individual’s budget constraints increases the utility level of

individual. The measurement of income level is frequently used in development economics.

On the other hand, measuring happiness is found not as compelling as other measurements in

economics (e. g. income, expenses, education). Until recently there are only few researches

about happiness related to economics.

Measuring utility level is considered as difficult by economists, especially in using

cardinality in the measurement and comparing the level of utility among individuals.

Furthermore, subjective measurement is found not interesting by economists. Bertrand and

Mullainathan (2001) finds this may happen because people may do something different from

what they say or even people may not understand what they are saying.

However, Konow and Earley (2008) find substantial measures of happiness hold objective

meanings by measuring the physical responses such as heart rate and blood pressure to

happiness. Kahneman (1999) stated that subjective measurements characterized by

considerable intrapersonal stability and interpersonal comparability are relevant for most

moment of happiness experience. These findings support subjective measures may be

complement objective measures of welfare.

The fact that happiness can be related with the income level through the utility level makes

development economists need to pay more attention to happiness. Ng (2003) stated that

disregarding the happiness would result in an overemphasis on preference that can be satisfied

2
World Happiness Report 2013

The Pursuit of Happiness in Indonesia | 2 Timotius H.P.

by income at the cost of preference that are difficult to satisfy by income. Furthermore,

(Oswald, 1997) finds that income which slightly higher than minimum level generates little

additional happiness, thus extra income does really matter (Di Tella et al., 2003).

This paper tries to find factors that may determine the happiness in Indonesia. As one of

many developing countries, Indonesia is a country that becomes great interests by many

researchers around the world. Indonesia is a good example of economic development as its

economic growth is rapid and sustain. After facing the great depression, monetary crisis and

political chaos in 1998, Indonesia rose and kept its positive growth rate since 1999 until 2013.

Indonesia is also one of few countries that survived the global financial crisis in 2008.

Figure 1. Indonesian GDP Growth Rate

10
6.35 6.01 6.22 6.49 6.26 5.78
5 4.92 4.78 5.03 5.69 5.5 4.63
3.64 4.5
0 0.79
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
-5

-10
-13.13
-15

Source: World Bank Database (data.worldbank.org)

Although it is shown that Indonesia has positive economic growth. One question still
remains: given the positive trends, are Indonesians people happy? What factors determine the
happiness?

Literature Review

The importance of happiness starts arising with the demonstration by Easterlin (1995) which

shows increases in income over time are not followed by increasing of happiness. However,

(Oswald, 1997) finds that there is bit additional happiness generated by income that slightly

higher than minimum level. Before then, only few economics researches try to explain factors

that may determine the happiness of individual. One of the first empirical studies about

The Pursuit of Happiness in Indonesia | 3 Timotius H.P.

happiness is done by Easterlin (1974). Thirty years after, Easterlin (2001) explains that

although there is a paradox found in Japan where drastic increasing of real income was not

followed by increasing of happiness, people tend to be happier when they think they have better

living than others. However, when people achieve higher status, they will adapt quickly and

set higher aim. Thus, he concludes that what matters to the happiness is relative income

standing rather than absolute income.

As interest of happiness increases all the time, more variables are considered. Demographic

variables are such variables that considered to determine the level of happiness. Louis and Zhao

(2002), Clark and Oswald (1994), and Alesina et al. (2004) tries to measure the happiness

across gender. The latter finds that women tend to be happier than man while the other finds

there is no happiness difference for both gender. However, Clark (2003) finds the opposite

result where women tend to be less happy then men.

Several empirical findings suggest that married people are tend to be happier than those who

are never married (Helliwell, 2003; Blanchflower and Oswald, 2004a). However, there might

be causality where happier people are more likely to be married (Lucas, 2005). Unfortunately,

there is no data that record the decision of people to get married in Indonesia. Thus, without

losing the generality, this paper measures the level of happiness of married people and also

people who are divorced, separated, and widowed compared to the people who are never

married (single).

In several countries that have more than ethnicity, it is worth to compare the level of

happiness toward different ethnic. Thoits and Hewitt (2001) estimate that being whites in

United States are tend to be happier than blacks. Sohn (2013) finds that being majority in

Indonesia (Javanese) have no effect on happiness. In order to measure more particular results,

this paper accommodates more than one ethnicity to be compared with Javanese. However,

The Pursuit of Happiness in Indonesia | 4 Timotius H.P.

Indonesia is a big country with more than 300 ethnicities. This paper shrinks the number and

put each ethnicity in closest category. Hence, this measures the happiness of Sumatrans

(consists of Aceh, Batak, Minang, Palembang, etc), Borneo (consists of Banjar, Dayak, etc),

Sulawesi and Ambon (consists Toraja, Manado, Ambon, etc), Bali and Lombok (consists of

Bali, Sumbawa, Lombok, etc) and compared to Javanese (consists of Javanese, Sundanese,

Betawi, etc).

Blanchflower and Oswald (2004b) finds that there is positive relationship between

happiness and education level. They conclude that people with higher education level tends to

be happier. However, in Switzerland, middle level of education correlates with the highest level

of happiness (Stutzer, 2004). In developing countries which have low-income, it is found that

education and happiness have strong relationship (Ferrer-i-Carbonell, 2005). This paper also

tries to accommodate to measure the happiness of respondents with their education

background.

Easterlin (2001) suggests that relative income standing is related to the level of happiness.

Thus, this paper tries to measure the correlation of happiness with respondent’s income. In

addition, to accommodate the suggestion of Easterlin (2001), this paper also tries to measure

the relationship of household’s assets with head of household’s happiness.

Model

This paper analyzes happiness of Indonesian people using Indonesia Family Life Survey-4

(IFLS-4)3 dataset published in 2007. In the survey, relating to the happiness, respondent was

asked: “Taken all things together how would you say things are these days - would you say

you were very happy, happy, unhappy or very unhappy?”. In this paper, very unhappy is

assigned −2, unhappy is assigned −1, happy is assigned 1, and very happy is assigned 2.

3
Can be accessed in https://www.rand.org/labor/FLS/IFLS/ifls4.html

The Pursuit of Happiness in Indonesia | 5 Timotius H.P.

Indeed, the answer will be multinomial with inherent ordering and the difference between each

response’s values is not necessarily the same. Regarding these characteristics, this paper uses

Ordered Probit Regression model with happiness as dependent variable.

Ordered probit model is based on a latent regression with unobserved outcome

y%∗ = ( )* + + -. (1)

As y%∗ is unobservable, instead of measuring its value, this model observes a censored
outcome: 0 if y%∗ ≤ 0
1 if 0 < y%∗ ≤ 34
5. = 2 if 34 < y%∗ ≤ 36
⋮
J if 3894 ≤ y%∗
This model normalizes the mean and variance of : to zero and one by assuming that - is

normally distributed (-~< (0,1)). Hence, the probabilities of outcomes 0,1, . . . , J are:

Prob 5 = 0 @A = Φ (−( )* +)
Prob 5 = 1 @A = Φ 34 − ( )* + − Φ (−( )* +)
Prob 5 = 2 @A = Φ 36 − ( )* + − Φ 34 − ( )* +
⋮
Prob 5 = C @A = 1 − Φ 3894 − ( )* +
Thus, for all the probabilities to be positive, we need the thresholds 3 satisfy:

0 < 34 < 36 < ⋯ < 3894

The Pursuit of Happiness in Indonesia | 6 Timotius H.P.

 Figure 2. Probabilities in Ordered Probit Model

Source: Greene, W.H. (2012) Econometric Analysis. Pearson: Westford. Chapter 18.

The implications of the structure is as shown in Figure 2. The partial effects of the regressors
x on the probabilities are not equal to the coefficient. In this paper, we have 4 categories of
responses. The model thus has only one unknown threshold parameter. The four probabilities
are:

Prob 5 = −2 @ = 1 − Φ (−@* +) (2)

Prob 5 = −1 @ = Φ 34 − @* + − Φ (−@* +) (3)

Prob 5 = 1 @ = Φ 36 − @* + − Φ 34 − @* + (4)

Prob 5 = 2 @ = 1 − Φ 3E − @* + (5)

For the four probabilities, the partial effects of changes in the regressors are:

FGHIJ 5 = −2 @
= −∅(@* L)L (6)
F@

FGHIJ 5 = −1 @
= ∅(−@* L − ∅ 34 − @* L L (7)
F@

FGHIJ 5 =1@
= ∅ 34 − @* L − ∅ 36 − @* L L (8)
F@

FGHIJ 5 =2@
= ∅ 3 − @* L L (9)
F@

The model to measure happiness in this paper is:

happiness = age + dVWXYZW + dXYHH%W[ + \]^_`.a.^b + \_.c_]d^]efag^.h` + :ijklkmn + k:o inn:on + -. (10)

The Pursuit of Happiness in Indonesia | 7 Timotius H.P.

Which:

ℎiqqlk:nn = indicator of happiness

im: = age of respondents
dVWXYZW = dummy variable for female respondent
\]^_`.a.^b = dummy variable for ethnicity of respondents (Greater Javanese,
Tionghoa (Chinese), Greater Sumatera, Greater Bali, Greater Borneo,
Greater Sulawesi and Ambon.
\_.c_]d^]efag^.h` = dummy variable for highest level of education attended by respondents
(elementary school, junior high school, senior high school, college and
university level)
:ijklkmn = monthly earnings of working respondents
k:o inn:on = net assets of respondents

Results
Descriptive Statistics

As previously discussed, this paper uses IFLS-4 dataset collected from more than 29,000

individuals in 2007. As we can see from

Table 1, there are 29,055 individuals responded to the happiness question. The mean of the

happiness variable shows that more individuals stated they are happy rather than unhappy.

Furthermore, the variable of age shows that the average age of the respondents is approximately

36 years old, as the youngest respondent is 14 years old and the oldest is 100 years old.

Dummy variables show respondents’ demographic characteristic, hence the mean of each

dummy variable shows the tendency of characteristics. For instance, the mean of dummy

variables female shows that 52 percent of respondents are female while the other 48 percent

are male. Indeed, the sum of mean for each category is equal to 100 percent.

Interestingly, the descriptive statistics of monthly earnings show that in the time the data

was recorded, the average earnings of each individual is approximately £50.00 per month, as

the lowest earning is around 40 pence and the highest is paid for about £1,060.00 in a month.

The Pursuit of Happiness in Indonesia | 8 Timotius H.P.

Accordingly, on average, every respondent has total net asset approximately £4,100 at the time

the data was recorded.

Before starting with the parametric analysis using Ordered Probit Regression, it can be seen

that there is no variable that either perfectly positive or inverse correlated to other variables

(see Table 3 Appendix 1).

Table 1. Descriptive Statistics

Variable Obs. Mean Std. Dev. Min Max
Happiness 29055 0.887833 0.640079 -2 2
Age 29962 36.88015 15.62241 14 100
D_Female 29967 0.521674 0.499538 0 1
D_Married 29966 0.691484 0.461889 0 1
D_Single 29966 0.225389 0.417845 0 1
D_Separated-widowed-divorced 29966 0.083128 0.27608 0 1
D_Greater_javanese 29968 0.612553 0.487175 0 1
D_Tionghoa (Chinese) 29968 0.007742 0.087647 0 1
D_Greater_sumatera 29968 0.141751 0.348801 0 1
D_Greater_bali 29968 0.104612 0.306057 0 1
D_Greater_borneo 29968 0.034103 0.181497 0 1
D_Greater_sulawesi_ambon 29968 0.055426 0.228813 0 1
D_Elementary_School 26921 0.3722 0.4834 0 1
D_Junior_High_School 26921 0.197355 0.39801 0 1
D_Senior_High_School 26921 0.315144 0.464582 0 1
D_College_Uni 26921 0.1153 0.31939 0 1
Monthly_earnings 9607 897386.7 1078679 5000 2.00E+07
Ln__monthly_earnings 9607 13.2395 1.035573 8.517193 16.81124
Net_asset 10446 7.75E+07 1.42E+08 25000 3.22E+09
Ln_Net_asset 10446 17.24517 1.496017 10.12663 21.89296
Source: IFLS-4 published by RAND (author’s calculation), http://www.rand.org/labor/FLS/IFLS/ifls4.html

Ordered Probit Analysis

This paper analyzes factors that determine the level of happiness in two level, namely

individual level and household level. In individual level, factors that measured by using

Ordered Probit Regressions are demographic variables and earnings of individuals. While total

net asset will be the only variable that is measured to the level of happiness. At the end of this

section, marginal effects are discussed to measure the probability of measurements fall in to

specific threshold of dependent variable, which is the indicator of happiness.

The Pursuit of Happiness in Indonesia | 9 Timotius H.P.

 Table 2. Ordered Probit Regression's Result4
(1) (2) (3) (4) (5) (6) (7)
Coefficient Marginal Effect
Variables
Individuals Household Outcome (-2) Outcome(-1) Outcome (1) Outcome (2)
-0.01 0.0001 0.0015 -0.0001 -0.00153
Age
(0.00)*** (0.0000)*** (0.0002)*** (0.0001) (0.00020)***
0.11 -0.0006 -0.0128 -0.0002 0.01367
D_Female
(0.03)*** (0.0002)*** (0.0037)*** (0.0007) (0.00417)***
0.29 -0.0021 -0.0380 0.0078 0.03229
D_Married
(0.04)*** (0.0005)*** (0.0058) *** (0.0026)*** (0.00418)***
D_Separated-widowed- -0.29 0.0026 0.0424 -0.0158 -0.02913
divorced (0.08)*** (0.0011)** (0.0131)*** (0.0081) (0.00614)***
-0.13 0.0009 0.0170 -0.0036 -0.01427
D_Tionghoa (Chinese)
(0.16) (0.0014)*** (0.0235) (0.0085) (0.01638)***
-0.19 0.0014 0.0251 -0.0057 -0.02078
D_Greater_sumatera
(0.04)*** (0.0005)*** (0.0063)*** (0.0026)** (0.00426)
-0.05 0.0003 0.0059 -0.0005 -0.00563
D_Greater_bali
(0.05) (0.0003)*** (0.0065) (0.0010) (0.00588)
0.13 -0.0006 -0.0140 -0.0023 0.01696
D_Greater_borneo
(0.09) (0.0004)*** (0.0087) (0.0036) (0.01259)***
0.25 -0.0011 -0.0257 -0.0100 0.03685
D_Greater_sulawesi_ambon
(0.07)*** (0.0003)*** (0.0062) ***
(0.0063) (0.01251)*
0.09 -0.0005 -0.0105 -0.0007 0.01169
D_Junior_High_School
(0.05)*** (0.0003)** (0.0051) (0.0010) (0.00619)***
0.21 -0.0012 -0.0246 -0.0020 0.02773
D_Senior_High_School
(0.04)*** (0.0003)*** (0.0045) ***
(0.0015) (0.00561)***
0.48 -0.0020 -0.0465 -0.0245 0.07304
D_College_Uni
(0.05)*** (0.0004)*** (0.0040) ***
(0.0058)*** (0.00923)***
0.14 -0.0009 -0.0173 0.0006 0.01759
Ln_Monthly_earnings
(0.02)*** (0.0002)*** (0.0021) ***
(0.0008) (0.00211)***
0.08
Ln_Net_asset
(0.01)***
-2.80 -1.43
Cut1
(0.09) (0.17)
-1.42 -0.16
Cut2
(0.06) (0.16)
1.62 2.83
Cut3
(0.06) (0.16)
Pseudo R2 0.0549 0.007
Pr(Happiness=outcome) 0.001865 0.062996 0.872949 0.06219
Source: IFLS-4 published by RAND (author’s calculation), http://www.rand.org/labor/FLS/IFLS/ifls4.html

The happiness level of Indonesian people is determined by several factors. It can be seen

that increasing of age significantly bring less happiness to Indonesian people. It means that as

4
The sample size for individual level is 9,263 individuals while the sample size for the household level is 10,445.
Standard errors clustered at the county level are in parentheses. * denotes a p-value<0.10; ** p-value <0.05; ***
p-value <0.01.

The Pursuit of Happiness in Indonesia | 10 Timotius H.P.

Indonesian people getting older, they become less happy. According to the marginal effect

calculation, as the age increases for one year, the people is significantly more probable to fall

in the unhappy threshold and has negative probability to fall in the very happy threshold (see

Table 2 column 2, 4 – 7).

Women in Indonesia are also happier than their counterparts. It can be seen that female is

significantly happier compared to male. The probability of woman being unhappy and very

unhappy also significantly less likely than being very happy.

Furthermore, married respondents are significantly happier compared to single respondents.

The probability of married respondents falls in to happy and very happy threshold also

significantly more likely than falls in to unhappy and very unhappy threshold. On the other

hand, divorced, separated and widowed respondent are significantly unhappier compared to the

single respondents. The marginal effect calculation of this variable also shows that this variable

has significant positive probability to fall in to unhappy and very unhappy threshold as it also

has negative probability to fall in to very happy threshold.

Compared to the Javanese, people who are Sumatrans and also Sulawesi and Ambonese

have different level of happiness. Sumatrans are unhappier than Javanese while on the other

hand Sulawesi and Ambonese are happier compared to Javanese. As the marginal effect

calculation supports this findings as well.

Educational background also matters for the happiness. Respondents that have higher

education than elementary school are significantly happier compared to those respondents who

only attended elementary school. This finding applies for respondents who attended Junior

High School, Senior High School, and College and University level.

Theoretically, increasing in income means increasing budget constraints and level of

consumption. Hence, it brings higher utility level that eventually increase happiness. This

The Pursuit of Happiness in Indonesia | 11 Timotius H.P.

empirical finding also suggest the same thing. Indonesian people who have higher earnings are

significantly happier. Indeed, more income means more happiness for Indonesian people.

Likewise, more assets also means more happiness for Indonesians. In household level, those

who have higher value of assets are significantly happier. Hence, for Indonesians wealth does

matter and contribute to the level of happiness.

Conclusions

There are many things that may determine the level of Indonesian people. Demographic

variables are found matter with the level of happiness in Indonesia. Although they show

different level of correlation, age, gender, marital status, and ethnicity are variables that

empirically affect the happiness of Indonesians. Likewise and not surprisingly, level of income

and wealth do matter with the happiness.

However, this level of happiness may change all the time. A time series analysis or panel

data analysis are highly recommended to measure the change of individual’s happiness in a

certain time period. From this further analysis we can see the changes of happiness given

dynamic variables. Unfortunately, this kind of database is yet to be available in Indonesia.

The Pursuit of Happiness in Indonesia | 12 Timotius H.P.

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Web sites:

http://www.lifecoachexpert.co.uk/whyishappinesssoimportant.html

data.worldbank.org

https://www.rand.org/labor/FLS/IFLS/ifls4.html

The Pursuit of Happiness in Indonesia | 14 Timotius H.P.

 Appendices
Appendix 1
Table 3. Correlation Matrix
Correlation happiness age female married single separated javanese tionghoa sumatera bali borneo sulawesi Elementary JHS SHS Coll_Uni Ln_Earnings
happiness 1.00
age -0.07 1.00
D_female 0.01 -0.07 1.00
D_married 0.08 0.41 -0.12 1.00
D_single -0.02 -0.52 0.04 -0.89 1.00
D_separated -0.13 0.18 0.17 -0.35 -0.13 1.00
D_javanese 0.01 0.04 0.01 0.04 -0.04 0.00 1.00
D_tionghoa 0.00 0.01 0.00 -0.03 0.03 0.00 -0.13 1.00
D_sumatera -0.05 -0.01 0.00 -0.04 0.04 0.00 -0.57 -0.04 1.00
D_bali 0.00 -0.02 -0.01 0.01 -0.01 -0.01 -0.46 -0.03 -0.13 1.00
D_borneo 0.03 -0.02 -0.01 0.00 -0.01 0.02 -0.26 -0.02 -0.07 -0.06 1.00
D_sulawesi 0.04 -0.02 -0.01 -0.03 0.03 0.00 -0.31 -0.02 -0.08 -0.07 -0.04 1.00
Elementary -0.14 0.24 0.02 0.09 -0.15 0.12 0.08 -0.03 -0.07 -0.02 -0.02 0.01 1.00
Junior_high -0.02 -0.14 -0.03 -0.04 0.05 -0.01 0.03 -0.01 -0.01 -0.02 0.00 -0.01 -0.30 1.00
Senior_high 0.05 -0.16 -0.09 -0.06 0.10 -0.08 -0.04 0.01 0.05 0.00 0.01 -0.01 -0.47 -0.32 1.00
College_uni 0.12 0.04 0.12 0.00 0.02 -0.04 -0.07 0.04 0.04 0.04 0.01 0.01 -0.32 -0.22 -0.34 1.00
Elementary 0.15 0.07 -0.19 0.13 -0.10 -0.08 -0.03 0.07 0.08 -0.05 0.03 -0.05 -0.37 -0.10 0.17 0.33 1.00
Ln_Earnings
Source: IFLS-4 published by RAND (author’s calculation), http://www.rand.org/labor/FLS/IFLS/ifls4.html

The Pursuit of Happiness in Indonesia | 15 Timotius H.P.

Appendix 2
Stata-do-command.

(URL of my dataset: https://www.dropbox.com/s/wu2n97hh1jzjjq7/data_final.dta?dl=0)

(URL of my recap: https://www.dropbox.com/s/grsvkr9j2oujux8/recap.xlsx?dl=0)

sum

histogram monthly_earnings

histogram ln_earnings

corr happiness age female married single separatedwidoweddivorced greater_javanese

tionghoa greater_sumatera greater_bali greater_borneo greater_sulawesi_ambon
elementary_school junior_high_school senior_high_school college_uni ln_earnings

mfx, predict (outcome(-2))

mfx, predict (outcome(-1))

mfx, predict (outcome(1))

mfx, predict (outcome(2))

histogram net_asset

histogram ln_net_asset

oprobit happiness ln_net_asset

mfx, predict (outcome(-2))

mfx, predict (outcome(-1))

mfx, predict (outcome(1))

mfx, predict (outcome(2))

The Pursuit of Happiness in Indonesia | 16 Timotius H.P.