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The purpose of this paper is to explore the impact of social capital on happiness. The previous literature generally measures social capital using “generalized trust”, which is a narrow dimension of social capital. In this study, social capital is measured as a multidimensional concept consisting of generalized trust, institutional trust and trust on family, neighborhood and strangers.

This study explores the relationship between social capital and average happiness using a panel data of 89 countries from 1980 to 2017. The empirical analysis is done by employing pooled OLS (POLS), fixed effects method (FEM), random effects method (REM) and system generalized method of moments.

The findings demonstrate that all measures of social capital are positively associated with happiness while comparatively institutional trust and generalized trust appear more significant for happiness. The findings are robust to different robustness checks. The findings document the importance of social capital for average happiness.

The research has certain limitations. First, the objective of study was to cover global sample of countries, however, the data series were not available for all countries. Second, the empirical is restricted to global evidence instead of exploring separate estimates for developed and developing world.

The findings document the importance of social capital for average happiness. The awareness of the importance of social capital needs to be increased. Government can develop such organizations or institutions that are conducive for social capital development.