Happiness Flight with Institutional Capabilities: Evidence of the Effects of Economic Freedom on Subjective Well-Being in Developing Countries
Happiness Flight with Institutional Capabilities: Evidence of the Effects of Economic Freedom on Subjective Well-Being in Developing Countries

Summary/Abstract: Recent empirical studies show that institutions are related to the elevation of subjective well-being in developing countries. Most of these studies use the change or increase in economic freedom and its impact on subjective well-being. None the less, the relative version of economic freedom is also feasible and none of the authors have analyzed this possibility. Furthermore, not much is discussed about the individual aspects of institutional capabilities valued by the citizens and how these preferences change the level of subjective well-being in developing countries. This study empirically analyzes whether institutional capabilities are conducive or detrimental to subjective well-being in a panel data of 30 countries between 1995 and 2014. This study attempts to close these gaps by conducting Random Effects analysis as an empirical strategy. Results show that both changes in economic freedom and its relative version are positively significant toward subjective well-being. The further finding indicates that the citizens of lower-middle-income and upper-middle-income countries are more sensitive to the access to sound money as compared to the citizens from higher-income countries.

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