The Howtown channel had a video on this last year, 'One weird metric picks the world's "happiest country"':

* https://www.youtube.com/watch?v=eg1--c2r8HE

They link to their sources:

* https://docs.google.com/document/d/1vFO-3Sq5-rorCWBIKwuR-Spk...

Specifically the Cantril Self-Anchoring Striving Scale ("Cantril Ladder") is used:

* https://www.sciotoanalysis.com/news/2024/2/9/what-is-cantril...

* https://news.gallup.com/poll/122453/understanding-gallup-use...

It's been around since 1965, so it's presumably been studied a lot and the pros and cons of it explored in the literature.