Free to Be Happy: Economic Freedom and Happiness in US States
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While the measurement of subjective well-being and its usefulness as a policy objective is a matter of contention, a burgeoning field of happiness economics is emerging. This paper examines the relationship between the institutions of economic freedom and happiness as reported by respondents to the Generalized Social Survey (GSS) in the United States. GSS responses are matched via geocode to state of residence. This allows individual responses in the GSS to be matched to institutional characteristics of the state of residence. A novel contribution of this study is that analysis of the effect of economic freedom on reported happiness is conducted both at the individual level and using state averages. It is found that the level of economic freedom in US states has a positive effect on both individual reported happiness and state average happiness. Dynamic panel analysis is also conducted both as a robustness check and in an effort to control for endogeneity. This confirms the relationship as positive and is suggestive of a causal positive impact of economic freedom on average state happiness.
KeywordsEconomic freedom Happiness Institutions Well-being
This research was supported by monies received from North Dakota State University and the Charles Koch Foundation. Many thanks go to Elizabeth Jackson for introducing me to the scientific study of happiness.
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