Aid and happiness: untangling the causal relationship in nine European donor countries

The goal of this paper is to use a simple causality test in the spirit of Granger to answer three questions on the relationship between the foreign aid disbursements of a donor country and its level of happiness. First, do higher aid flows make a donor happier? Second, does a happier donor give more aid? Third, does causality proceed in both directions simultaneously? Using data for nine European donors, we find that the answers to these questions are not uniform. In particular, causal relationships exist for France and the UK, but not for other countries.