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This paper uses Behavioral Risk Factor Surveillance System data to study life satisfaction and mental health across the geography of the United States. The analysis draws on a sample of 1.3 million citizens. Initially we control for people's personal characteristics (though not income). There is no correlation between states' regression-adjusted well-being and their GDP per capita. States like Louisiana, plus Washington, D.C., have high psychological well-being levels; California and West Virginia have low well-being. When we control for incomes, satisfaction with life is lower in richer states, just as compensating-differentials theory would predict. Nevertheless, some puzzles remain.
Oswald et al. (Thu,) studied this question.