Government size, intelligence and life satisfaction

•The article explores impact of government size and intelligence on life satisfaction.•It finds a novel channel through which bureaucracy impacts subjective wellbeing.•The government size impacts positively life-satisfaction in cognitively able societies.•The paper contributes to the studies on political institutions and intelligence.

Recent studies show that psychological factors such as cognitive ability play an important role in the empirical modeling of life satisfaction and suggest that intelligence is an important proxy for political and intellectual capital. These articles, however, only explore the direct effect of intelligence on subjective wellbeing. In this study, we conjecture that intellectual capital is a mechanism through which the size of bureaucracy impacts life satisfaction. Using data from 147 countries, we find that the interaction term between nation-IQ and government size is positive and significant, suggesting that government size increases life satisfaction most in high-IQ countries and least in countries with lower levels of cognitive abilities.