Artificial Intelligence Adoption, Internet Penetration, and Subjective Well-Being in the GCC Region: A Panel ARDL Analysis

This paper examines the long-run relationship between subjective well-being and digital transformation in the six Gulf Cooperation Council (GCC) countries—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—over the period 2011–2025 using a balanced country-year panel dataset. Subjective well-being is measured by the national average Cantril Ladder score from the Gallup World Poll as reported in the World Happiness Report. Explanatory variables include a binary AI Readiness Period Indicator (AI) distinguishing the pre-AI-readiness phase (2011–2018, AI = 0) from the post-AI-readiness phase (2019–2025, AI = 1), anchored by the Oxford Insights Government AI Readiness Index, Internet penetration from the International Telecommunication Union (ITU), and real GDP per capita. After accounting for cross-sectional dependence and non-stationarity, the analysis employs a panel autoregressive distributed lag (ARDL) framework estimated via the Pooled Mean Group (PMG) approach. The results indicate the existence of a stable long-run cointegrating relationship among the variables. The baseline PMG estimates suggest positive long-run associations between GDP per capita and the AI Readiness Period Indicator with subjective well-being, and a negative association between Internet penetration and well-being in a high-connectivity regional context. Short-run effects are generally weak, while the error-correction term confirms adjustment toward the long-run equilibrium. Robustness checks based on alternative estimators confirm the positive long-run effect of income, while the estimated effects of the AI Readiness Period Indicator and Internet penetration show sensitivity in sign and significance across specifications and should therefore be interpreted as indicative rather than definitive. Overall, the findings suggest that digital transformation is not a homogeneous driver of subjective well-being. Instead, the AI Readiness Period Indicator and Internet penetration operate through distinct mechanisms, with potentially different welfare implications in highly connected rentier-state economies.