Does Environmental Quality Drive Happiness? Evidence from Dynamic Panel System-GMM Analysis in Indonesia

Aim . This study examines whether environmental quality drives happiness in Indonesia, a large developing country facing serious ecological challenges. Methodology . Using provincial panel data from 2014, 2017, and 2021, the analysis applies the System-Generalized Method of Moments (System-GMM) to account for persistence in happiness and address endogeneity. Results . The results reveal that environmental quality significantly increases happiness across provinces, with effects that persist dynamically over time. Moreover, interaction models show that the positive impact of environmental quality is amplified in provinces with higher income, education, and life expectancy, underscoring the multidimensional nature of well-being. The study suggests that environmental improvements should be prioritized as part of Indonesia's welfare agenda and integrated with broader socioeconomic development. By doing so, Indonesia can strengthen its commitment to "Beyond GDP" development and align with the Sustainable Development Goals. Research implications . These findings extend the literature on the economics of happiness by providing robust evidence from a developing country context, highlighting both methodological and policy relevance.