Does an increase in the size of government come at the expense of individual happiness? Does limited government increase self-reported measures of the quality of life? A study by three Swiss economists recently posted to SSRN suggests the answer is "yes." In the authors' words: "government involvement is detrimental to individuals’ quality of life."
Here is the abstract for the paper, "The Bigger the Better? Evidence of the Effect of Government Size on Life Satisfaction around the World":
This paper empirically analyzes the question whether government involvement in the economy is conducive or detrimental to life satisfaction in a cross-section of 74 countries. This provides a test of a longstanding dispute between standard neoclassical economic theory, which predicts that government plays an unambiguously positive role for individuals' quality of life, and public choice theory, that was developed to understand why governments often choose excessive involvement and regulation, thereby harming voters' quality of life. Our results show that life satisfaction decreases with higher government spending. This negative impact of the government is stronger in countries with a leftwing median voter. It is alleviated by government effectiveness - but only in countries where the state sector is already small.Although I like the paper's general conclusions, I am skeptical that the findings are particularly robust. Among other things, I doubt the reliability of some of the data, such as results from the World Values Survey, which purports to measure life satisfaction and social trust in various nations. Nonetheless, taken with the appropriate grain(s) of salt, it's an interesting study. It's posted on SSRN here.