Canada ranks among the happiest nations in the world, ahead of our U.S. neighbours but behind five northern European countries, according to the second annual World Happiness Report.

The report, which is published by the UN Sustainable Development Solutions Network, was designed to track countries’ progress against specific measures of happiness, and also help policy makers address the needs of their citizens.

Co-editor and director of Columbia University's Earth Institute, Prof. Jeffery Sachs, said the report can help better guide policy makers because it is based, in part, on citizens' assessments of their own well-being.

"There is now a rising worldwide demand that policy be more closely aligned with what really matters to people as they themselves characterize their well-being,” he said in a statement. "The World Happiness Report 2013 offers rich evidence that the systematic measurement and analysis of happiness can teach us a lot about ways to improve the world's well-being and sustainable development."

The report found that the major beneficial side-effects of happier populations include longer life expectancies, higher earnings and higher levels of productivity.

In order to create the report, a number of variables were examined based off available data and the results from the Gallup World Poll – a survey of citizens in over 150 countries that asks them to describe their happiness. This year's report includes Gallup survey data collected from 2010-2012.

A population-weighted score out of 10 was then derived for each country, based on several factors including life expectancy, social ties and GDP per capita.

Out of the 156 countries included in the report, Canada ranks sixth, behind Denmark (1), Norway (2), Switzerland (3), the Netherlands (4) and Sweden (5).

The U.S. ranked seventeenth, ahead of the U.K. (no. 22) and France (no. 25), but behind Costa Rica (no. 12) and Mexico (no. 16). The West African nations of Benin and Togo ranked the lowest in happiness.

In the first World Happiness Report, released in 2012, Canada was ranked the fifth happiest country.

General trends noted in the 2013 report include:

The world has become slightly happier and more generous in the last five years.

Happiness (as measured by citizens' own evaluations of their lives) significantly improved in 60 countries and worsened in 41.

Mental health may be the single most important determinant of individual happiness. But while about 10 per cent of the world's population suffers from clinical depression or anxiety disorders only around one-third of those in need in developed countries are in treatment.

Regional differences were apparent, with increases in levels of happiness most notable in Latin America & the Caribbean and significant reductions in happiness noted in Western Europe and the Middle East and North Africa.

According to the study six key variables explained nearly 75 per cent of the variation in national scores: real GDP per capita, healthy life expectancy, having someone to count on, perceived freedom to make life choices, freedom from corruption and generosity.

Report co-editor and University of British Columbia Prof. John Helliwell told CTV News Channel that Canada placed high on the list because its scores on each of those six variables were good.

“Canada is pretty well explained by those six factors,” he said Monday. “Yes, we do well pretty well on all of those six.”

Helliwell added that declines in Western Europe and the Middle East were tied to the economic crises in multiple European countries and the conflict in Egypt respectively.

The report was released two weeks ahead of the 68th session of the UN's General Assembly.