This study aims to explore spatial externalities in subjective well-being (SWB) as sources of regional disparities. Although previous studies have shown positive externalities in SWB, the estimated effect is frequently confounded by unobserved regional heterogeneities, which can be sources of regional disparities. Using a household panel dataset collected in South Africa, the study estimates spatial econometric models with fixed effects to show spatial externalities in SWB by explicitly controlling for unobserved heterogeneities at the individual and regional levels. Estimation results indicate strong spatial dependence on SWB, confirming that spatial externalities within and across geographical clusters are essential factors for explaining regional disparities
