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This paper aims to investigate the effects of social policy factors on national happiness and national competitiveness in OECD countries, with particular emphasis on the relationships among inter-rlated factors involved in social policy process. For this purpose, this study employs Structural Equation Modeling approach (SEM) in order to identify direct and indirect effects among key variables relating to social policy decision making. The main findings of the research include: the more the budget for unemployment is, the lower the national competitiveness is; the higher the welfare budget is, the higher the gini index is; the higher the welfare budget is, the higher the employment budget is; and, the higher the welfare budget is, the lower the happiness level is. The article emphasizes the importance of the factors affecting social policy in allocating resources, and making decisions on national competitiveness framework.