Abstract
This study examines whether economic freedom is indirectly associated with life satisfaction through GDP per capita and whether governance quality conditions the association between GDP per capita and life satisfaction. The revised analysis uses a balanced panel of 30 European countries observed in 2018, 2021, 2022, and 2023 (N = 120). A second-stage conditional process model is estimated with period indicators, country-clustered inference, and cluster bootstrap confidence intervals. The principal result is a negative GDP per capita × governance interaction (B = −0.568, cluster-robust p = 0.001; restricted wild cluster bootstrap p = 0.019): the positive association between GDP per capita and life satisfaction is stronger at comparatively lower governance levels within the European sample and weaker at comparatively higher governance levels. Contemporary conditional indirect associations are positive at comparatively lower and central governance levels but not at the upper representative level; the index of moderated mediation is −0.352, with a country-bootstrap 95% CI [−0.510, −0.211]. Robustness checks using a correlated-random-effects/Mundlak specification, income inequality, exclusion of 2021, six separate governance dimensions, and actual individual consumption preserve the negative interaction. A temporally ordered exploratory model supports the interaction but not the indirect index. Given the observational panel design, the findings should be interpreted as statistical associations rather than causal effects. They provide robust evidence of institutional moderation, whereas evidence for the indirect pathway remains sensitive to model specification and temporal ordering.