Does Social Trust Increase Individual Happiness in Japan?

Economists are mainly interested in trust as being growth enhancing, but whether trust is well-being enhancing is underexplored. This paper examines if trust is intrinsically valuable by using individual happiness data from Japan. I attempt to mitigate the problem of non-random selection of residents by restricting the sample to non-movers. I also address reverse causality by instrumenting trust with residential stability, as trust should be higher for a more stable community. I find that trust has positive and significant effects on individual happiness. The instrumental variables approach suggests that social trust has a causal effect on individual happiness. © 2011 Japanese Economic Association