Well-being and economic freedom: Evidence from the States

There is ample evidence that well-being, measured in various ways for a large number of countries, is positively related to the level of general intelligence. Pesta at al. (2010a) verify this close relationship between well-being and IQ across states. There also is evidence that well-being is positively related to economic freedom across countries. The purpose of this study is to determine whether economic freedom and well-being are related at the state level. Our regression analysis indicates that, across the 50 states, improvements in economic freedom lead to higher levels of well-being after controlling for other economic factors. We also find that the relationship between well-being and economic freedom differs significantly across regions in the United States.

► We examine the impact of economic freedom on well-being at the state level.
► We control for regional differences along with population density and unemployment.
► The marginal impact of increasing economic freedom displays diminishing returns.