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

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.