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The effect is largest for the poor, Flavin said, but richer citizens in big-government countries reported more satisfaction than their small-government counterparts, too.
"This is one piece of evidence that we should think long and hard about, what the effect on citizens' well-being would be if we starting changing Medicare to a voucher system or reducing welfare benefits," Flavin said.
Room for interpretation
The study isn't the first to link government intervention with happiness. One of Flavin's co-researchers authored a 2010 paper in the Journal of Politics finding that U.S. states with bigger governments have happier citizens. [Read: Happiest States Revealed by New Research]
On the other hand, a 2007 study published in the journal Political Choice used the same World Values Survey from 1997 to 2001 to compare government size (as measured by the percent of GDP made up by government consumption) and life satisfaction in 74 countries. That study found the opposite result as Flavin's: Bigger governments seemed to make people unhappy.
Justina Fischer, a senior researcher in economics at the University of Mannheim in Germany and a researcher on the 2007 study, said she thought the difference could stem from the different time periods in which the data was gathered. In the late 1990s, she said, the countries studied had left-leaning governments that may have grown the government too large; In 2005 to 2008, when Flavin's data were taken, those governments had shifted rightward.
"Given this change in governments between the 1990s and 10 years later, I think their finding is an effect of conservative governments cutting too much," Fischer told LiveScience.
In other words, Fischer said, there could be a certain balance between government size and private efficiency that both studies are dancing around. Fischer's study, she said, caught people's attitudes during a time of too much government, so cuts to government spending drew them back toward the ideal. Later, governments may have overcorrected, meaning that a tendency not to cut as much made people happier.
Measuring happiness and government size is difficult, Wolfers told LiveScience, not only because it can be tough to define what those variables mean, but also because cultural differences can confound the results. Nordic countries, which ranked high in happiness in Flavin's study, tend to be cheerful places, Wolfers said, while former communist countries are never quite as happy as would be expected.
To get to the bottom of the question, Wolfers told LiveScience, economists would have to conduct larger studies on more countries. The ideal study would randomly assign people to live in states with big governments and states with small governments and then watched to see how happy they become. Obviously, that sort of research isn't possible, Wolfers said, so conclusions about government size and happiness have to be drawn "from a pastiche of evidence." That leaves room for interpretation.
"It's very likely that a Democrat and a Republican would read that evidence and come to different conclusions," Wolfers said. "And that's because we don't have that single perfect experiment."