Social Capital: Influencer of Happiness

The causes for happiness have still not been fully established. This can be exemplified by the Latin American paradox, which entails the unpredictably high happiness levels, but a poor economic status in Latin America. A potential key to this problem is implemented, social capital, which - based on past findings - would be the variable that solves the paradox. The paper tries to assess whether social capital plays a greater role for happiness in Latin America than in western countries. The research question will be answered with the use of World Value Survey data. This study tests whether the Latin American paradox is truly present in the used dataset. Moreover, regressions included social capital variables - an overall measure of social capital and three generally accepted categories of social capital: social relations, social trust and social norms - as the independent variable and life satisfaction as the dependent variable. With the use of control variables, omitted variable bias will try to be foregone for the greatest part. In addition, t-tests on the mean levels and regression coefficients will show whether there is a significant difference in the levels of social capital or the influence of social capital across multiple regions. The results show that social capital does have a significantly positive influence on happiness. Yet, this influence differs across regions, as it is significantly lower in Latin America compared to the average global influence or compared to the western region or the global average. These results hold when the overall measure for social capital is studied, but also when social capital is split into the three categories. These findings result in the following conclusion: social capital does not have a significantly greater influence on happiness in Latin America compared to the western region. This influence might even be higher in western region. Nevertheless, it could be concluded that Latin America reports a significantly higher average happiness level, even though it appears to be caused by a different factor than social capital. Thus, the Latin American paradox cannot be explained through social capital.