Economic Freedom and Life Satisfaction : A Cross Country Analysis

Abstract: This paper estimates the relationship between various sub-indicators of economic freedom and life satisfaction for 122 countries. The estimation results show that life satisfaction is positively related to the quality of the legal system and protection of property rights. For poor countries, freedom of trade fosters life satisfaction as well. Life satisfaction is independent from the size of the government and sound money and tends to be negatively related to low regulation. If the relationship between life satisfaction and economic freedom is controlled for income per capita, life satisfaction is independent from economic freedom. This indicates that the relationship between life satisfaction and economic freedom is mediated by income per capita.