According to this report in the Iceland Review, Terry Gunnell, associate folklore professor at the University of Iceland, has surveyed Icelanders and discovered a large number who believe in elves and ghosts (and a larger number who wouldn't rule them out).
Only 13 percent of participants in the study said it is impossible that elves exist, 19 percent found it unlikely, 37 percent said elves possibly exist, 17 percent found their existence likely and eight percent definite. Five percent did not have an opinion on the existence of elves.
More admitted to believing in ghosts. Only seven percent said their existence was impossible, 16 percent unlikely, 41 percent possible, 18 percent likely and 13 percent definite. Four percent had no opinion on the existence of ghosts.
I can't locate the research (here's the researcher's website), and I'm not sure how that compares to other western societies, though I believe it to be higher than US, UK and Canadian beliefs in supernatural phenomena (apart from those incorporated into Abrahamic religions) (oh, and homeopathy).
Iceland Still Believes in Elves and Ghosts
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