Institutional Origins of Subjective Well-Being: Estimating the Effects of Economic Freedom on National Happiness

Journal of Happiness Studies, Vol. 17(2): p. 659-712, April 2016

54 Pages Posted: 20 Jan 2017 Last revised: 24 Jan 2017

See all articles by Rok Spruk

Rok Spruk

University of Ljubljana - Faculty of Economics

Aleksandar Keseljevic

University of Ljubljana - Faculty of Economics

Date Written: April 1, 2016

Abstract

We exploit the cross-country differences in economic freedom to examine the link between the quality of institutions and subjective well-being. Using Veenhoven’s happiness dataset, the evidence suggests countries with better economic institutions and higher level of economic freedom, captured by the security of property rights, open markets and more limited government, are significantly more likely to experience greater subjective well-being after controlling for structural confounders of national subjective well-being such as income, unemployment, inequality, social capital and life satisfaction. The effect of institutions on cross-national happiness is both significant and robust to different model specifications, estimation techniques and possible sources of endogeneity. Furthermore, our panel data analysis reveals that over time higher levels of economic freedom are associated with decreasing subjective well-being after controlling for state dependence and income.

Keywords: Economic Freedom, Institutions, Happiness, Well-Being

JEL Classification: D60, I31

Suggested Citation

Spruk, Rok and Keseljevic, Aleksandar, Institutional Origins of Subjective Well-Being: Estimating the Effects of Economic Freedom on National Happiness (April 1, 2016). Journal of Happiness Studies, Vol. 17(2): p. 659-712, April 2016. Available at SSRN: https://ssrn.com/abstract=2901872

Rok Spruk (Contact Author)

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

Aleksandar Keseljevic

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

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