Free to choose? Economic freedom, relative income, and life control perceptions

Abstract

Recent research has shown that the degree to which people feel they are in control of their lives is an important correlate of individual happiness, where those who feel more in control are found to be systematically happier. In turn, the economic sources of perceived life control are only insignificantly established in the literature. The present paper employs individual data from the World Value Survey and European Values Study, covering the period from 1981 to 2013, to establish the macro-determinants of individual life control. We find that living in a country with high overall economic freedom is a major determinant of feeling in control of one’s own life. The effect is similar for individuals in high- and low-income countries, while the impact of democracy is negligible in both cases. Interacting relative income with economic freedom, we find that, contrary to conventional wisdom, it is by far the lower income groups that derive the biggest gain of perceived life control from living in a country with comparatively high economic freedom. In low-income countries, the effects of economic freedom on life control perceptions do not appear to be conditional on personal income levels.