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Do good institutions make citizens happy, or do happy citizens buid better institutions?

Abstract: Recent empirical investigations show that ?good economic institutions? in the form of economic freedom raise average measures of subjective well-being across countries. Still, not much is known about the elements of economic freedom that are really valued by citizens in terms of procedural utility and most studies automatically assume that causality runs from formal institutions to happiness, even though an inverse relationship is also feasible a priori. As a consequence, many authors make policy recommendations aimed at improving institutions in order to raise countries? aggregate levels of life satisfaction, and few have specifically analyzed the possibility of reverse causality. This paper seeks to contribute to closing these gaps, using ordinary least squares and instrumental variables for an empirical analysis. Results show that, above the economic effects of economic freedom on income, citizens in developing countries value access to sound money, free trade, and freedom from regulation, while citizens in developed countries value political freedom and a well functioning legal system. Results also indicate the existence of a solid causal channel from economic freedom to self-reported individual well-being, which further reinforces these measures as a tool in the economic analysis of institutions.

Otras comunicaciones del congreso o articulos relacionados con autores/as de la Universidad de Cantabria

 Congreso: Congreso Internacional de Economía Aplicada ASEPELT (25º : 2011 : Santander)

 Editorial: Delta

 Año de publicación: 2011

 Nº de páginas: 28

 Tipo de publicación: Comunicación a Congreso

 ISSN: 2174-3088

Autoría

MARTIN DIETER RODE