Abstract
Previous research has shown that economic freedom is associated with life satisfaction. Nonetheless, how economic freedom affects life satisfaction remains relatively unexplored. Test results on a sample of 238,944 observations from 78 countries in the period from 1990 to 2020 show that individual autonomy is a possible channel (so-called mediator): whereas economic freedom is found to foster individual autonomy, individual autonomy in turn increases life satisfaction. The relationship between economic freedom and individual autonomy particularly concerns two subdimensions of economic freedom: sound money and freedom to trade internationally. The test results show that the indirect effect of economic freedom on life satisfaction through individual autonomy is significant and explains 18% of the total relationship between economic freedom and life satisfaction. Furthermore, we find that the strength of the relationship between individual autonomy and life satisfaction increases with individualism, one of Hofstede's dimensions of national culture (i.e., individualism is a moderator). This suggests a so-called moderated mediation model, in which the relationship between economic freedom and life satisfaction is mediated by individual autonomy and moderated by individualism.
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