Economic Freedom and Eudaimonic Well-Being: Exploring the Socio-Economic Paths to Psychological Functioning

Date

2019-05-09

Authors

Klein, Coleman

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Abstract

It is well established that economic freedom promotes economic development and social progress. However, economic freedom can also promote income inequality that can stifle economic mobility and harm citizens. While previous studies have examined the relationship between economic freedom and hedonic well-being (life satisfaction and affect), this paper explores how economic freedom affects people’s personal and social psychological functioning (flourishing) defined as one’s resilience, autonomy and control, mastery and engagement, environmental mastery, positive relationships, and self-acceptance. To do this, I plot the mean score for each country’s economic freedom against their mean score for social and personal psychological functioning. In addition, using structural equation modelling, I explore the socio-economic paths from economic freedom to psychological functioning via the channels of economic development, income inequaltiy, unemployment, inflation, democracy and individualism. The results indicate that economic freedom is positively correlated with both personal and social functioning. Overall, these results suggest that perceived problems with economic freedom do not outweigh its well-being benefits.

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Entrepreneurship, Economics, Psychology

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