The UAE is the happiest country in the Arab world and ranks 20th among 156 countries measured in this year's World Happiness Report.

The report was released on Wednesday ahead of the UN's International Day of Happiness and saw the UAE inch up one position from 21st place in 2017.

Finland topped the list with fellow Scandinavian countries Norway (the former world number one), Denmark and Iceland making up the top four.

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Qatar was the next highest-ranking Arab country, earning 32nd place just above Saudi Arabia at 33. Bahrain and Kuwait ranked 43 and 45 respectively.

The US dropped four spots from 2017 to rank 18th happiest country this year.

The bottom three in the list were Burundi, Central African Republic and South Sudan – all countries that have struggled with conflict and instability.

This year, for the first time, the annual report published by the UN Sustainable Development Solutions Network also evaluated 117 countries by the happiness and well-being of their immigrants.

In 1990, 153 million people lived outside the country they were born in. By 2015, the number had jumped to 244 million, of whom about 10 per cent were refugees.

The proportion of immigrants is higher in richer countries, the study read.

In Western Europe, most countries have immigrants at between 10 and 15 per cent of the population. The same is true of the US; while Canada, Australia and New Zealand have between 20 and 30 per cent. The most extreme cases are the UAE and Kuwait, both with populations comprising more than 70 per cent of immigrants.

John Helliwell, a co-editor of the World Happiness Report and professor emeritus of economics at the University of British Columbia, said that all the top 10 countries scored highest both in overall happiness and in the happiness of immigrants. He said a society's happiness seems contagious.

"The most striking finding of the report is the remarkable consistency between the happiness of immigrants and the locally born," Mr Helliwell said.

"Those who move to happier countries gain, while those who move to less happy countries lose."