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Heterogeneous Impacts of Community-Level Trust on Life Satisfaction in Transition Countries: Perspectives on Institutions and Regional Diversity

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Abstract

This study examines the relationship between trust and life satisfaction in transition countries, focusing on community-level trust, institutions, and regional diversity. Transition countries, characterized by unique levels and trends of subjective well-being (SWB) and trust, present an intriguing case for study. These countries exhibit lower happiness levels compared to non-transition counterparts, despite similar income levels—a phenomenon known as the "transition happiness gap." Additionally, the influence of trust on SWB in these regions remains insufficiently understood, given the lingering effects of communist rule and dictatorship that have fostered fear and distrust. This research fills existing gaps by investigating the impacts of community-level trust on life satisfaction, distinguishing between interpersonal and institutional trust, and differentiating between Central and Eastern Europe (CEE) and the former Soviet Union (FSU). Using data from the Life in Transition Survey conducted in 28 transition countries from 2006, 2010, and 2016, the study employs instrumental variables to address endogeneity. The findings reveal that community-level interpersonal and institutional trust positively influence life satisfaction in transition countries, emphasizing the importance of meso-level trust. Interpersonal trust has a stronger impact on life satisfaction than institutional trust, particularly in countries with low-quality formal institutions. Moreover, the effects of trust on life satisfaction are more significant in the FSU compared to the CEE, potentially due to compensatory effects and the historical accumulation of trust.

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Data Availability

The study used third-party data available at https://www.ebrd.com/what-we-do/economic-research-and-data/data/lits.html.

Notes

  1. Following previous studies (Habibov et al., 2019b), the division between the two regions is based on the European Bank for Reconstruction and Development's classification, which takes into account pre-transitional characteristics, transitional speed, and the current levels of socioeconomic and political development of these countries. Mongolia is included in Central Asia in the classification, although it was not a part of the Soviet Union. And also, we regard the Baltic States (Estonia, Latvia, and Lithuania) with the CEE group because these countries are not considered to be in the FSU in the classification and have a similar feature with the CEE that is a member of the North Atlantic Treaty Organization (NATO) and the European Union (EU).

  2. In the LITS of 2010, respondents were asked a similar life satisfaction question again at the end of the questionnaire in the same interview through the statement, “All things considered, how satisfied or dissatisfied are you with your life as a whole these days? Please answer on a scale from 1 to 10, where 1 means completely dissatisfied and 10 means completely satisfied.” According to Nikolova and Sanfey (2016), the answers to the two questions on life satisfaction are highly consistent. Hence, in this study, we follow this view and use only the first question that was also asked in the LITS of 2006 and 2016.

  3. This study also confirmed that the result is similar even when using the trust variable of five response categories in the Robustness analysis.

  4. Although life satisfaction is measured on an ordered five-point scale, Ferrer-i-Carbonell and Frijters (2004) determined that the assumption of cardinality or ordinality of responses to SWB questions is relatively unimportant to the results. Hence, treating SWB as a continuous variable and using the linear estimation method is widely employed in the literature on happiness studies (Bauer et al., 2017; Djankov et al., 2016; Growiec and Growiec, 2014; Lu et al., 2020). This study confirmed that the result is similar even when using the ordered probit and IV probit techniques and also linear regression using the 10-scale life satisfaction variable in the Robustness analysis.

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Acknowledgements

The authors are indebted to participants in 63rd Annual Conference of the Japanese Association for Comparative Economic Studies and the graduate seminar at the Graduate School of Economics and Business, Hokkaido University. We especially thank Dr. Daichi Yamada, Dr. Toshiaki Aizawa, Dr. Ryo Makioka, Dr. Yuka Takeda and three anonymous reviewers for their useful and constructive comments. We would like to thank Editage (www.editage.com) for English language editing. This work was supported by JSPS KAKENHI Grant Number JP18K01559 and Platform for Explorations in Survival Strategies at the Slavic-Eurasian Research Center, Hokkaido University, supported by the Ministry of Education Culture, Sports, Science and Technology-Japan.

Funding

JSPS KAKENHI Grant Number JP18K01559, Platform for Explorations in Survival Strategies at the Slavic-Eurasian Research Center, Hokkaido University, supported by the Ministry of Education Culture, Sports, Science and Technology-Japan.

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Authors and Affiliations

  1. Institute of Developing Economies, 3-2-2 Wakaba, Mihama-Ku, Chiba-Shi, Chiba, 261-8545, Japan

    Kaito Doi

  2. Faculty of Economics and Business, Hokkaido University, Kita9 Nishi7, Kita-Ku, Sapporo, 060-0809, Japan

    Masato Hiwatari

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Kaito DOI: Formal analysis, Writing – original draft. Masato HIWATARI: Supervision, Formal analysis, Writing – review&editing, Funding acquisition.

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Correspondence to Masato Hiwatari.

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The data in this study are based solely on publicly available data, Life in Transition Survey I, II, and III, collected by The European Bank for Reconstruction and Development and the World Bank. Personal information is kept confidential and medical data are not included.

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Appendix A

Appendix A

Tables

Table 6 First stage of 2SLS regressions for main results (Table 2)
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Table 7 First stage of 2SLS regressions for robustness analysis (Table 3)
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7,

Table 8 First stage of 2SLS regressions for trust types (Table 4)
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8,

Table 9 First stage of 2SLS regressions for regional results (Table 5)
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9

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Doi, K., Hiwatari, M. Heterogeneous Impacts of Community-Level Trust on Life Satisfaction in Transition Countries: Perspectives on Institutions and Regional Diversity. Applied Research Quality Life 18, 2895–2934 (2023). https://doi.org/10.1007/s11482-023-10212-w

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  • DOI: https://doi.org/10.1007/s11482-023-10212-w

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