The United States and Germany came in 23rd and 24th respectively.
Finland has been named as the happiest country in the world for the seventh year in a row.
This is according to the annual World Happiness Report published on Wednesday, March 20.
Fiinland's Nordic neighbours Sweden, Denmark and Iceland also retained their places in the top 10.
Rising unhappiness, especially among young people, has seen other Western countries drop down the index, with the United States and Germany dropping out of the top 20 for the first time since the report's first edition more than a decade ago.
The United States and Germany came in 23rd and 24th respectively. In turn, Costa Rica and Kuwait entered the top 20 at 12 and 13, while Eastern European countries Serbia, Bulgaria and Latvia reported the biggest increases in happiness.
Afghanistan, plagued by a humanitarian catastrophe since the Taliban regained control in 2020, remained in last place.
The survey asks people in 143 countries and territories to evaluate their lives on a scale from zero to 10, taking into account factors such as GDP per capita, social support, healthy life expectancy, freedom, generosity and corruption.
Its release coincides with the International Day of Happiness on March 20.
The report noted that the happiest countries no longer included any of the world's largest countries.
“In the top 10 countries, only the Netherlands and Australia have populations over 15 million. In the whole of the top 20, only Canada and the UK have populations over 30 million,” the report states.
Previous research into well-being often found happiness to be highest in childhood and early teens, before falling in middle age and then rising again upon retirement.
However, the report found that in some countries, today's younger generations were more likely than older age groups to report loneliness.
"Youth, especially in North America, are experiencing a mid-life crisis today," said University of Oxford economics professor and report editor Jan-Emmanuel De Neve.
He associated the increasing unhappiness among Western youth with a range of factors including the negative aspects of social media, increased polarization over social issues, and economic inequality that made it harder for young people to afford their own homes than in the past.