Abstract
This paper's aim is to propose a mediation framework and test whether lifestyle choices and social capital are pathways through which locus of control (LoC) affects subjective well-being. Using longitudinal data for Australia, we find that life satisfaction and mental health are explained by direct and indirect effects of LoC. The direct effect is positive, indicating that individuals with an internal LoC have higher levels of life satisfaction and mental health. We also show that physical activity and social interaction are two pathways linking an internal LoC to higher levels of well-being. Our findings provide new insights into the relationship between LoC and subjective well-being and suggest that, if the aim of policy is to improve well-being, the focus should be on enabling people to develop an internal LoC. This may lead to higher well-being both through the identified channels and, more importantly, through the direct channel of LoC.