The Relation of Happiness and Social Capital. Analysis based on the World Value Survey

Introduction

The following paper will examine the relation between social capital and happiness. So far, much research has been conducted in the field of social capital in order to test and define its far reaching influence. Social capital has not only received tremendous attention from the social scientists, but also from economists. Research has focused on the implications of social capital and the political system and has examined the relation of social capital and growth. So far, however, little research has been conducted to link social capital and happiness. Both aspects are intrinsic to human action and are essential for understanding human development and behavior. Hence, the research question of this paper is: Is there a relation between social capital and happiness? If yes, what are possible policy implications?

To answer the posed research question this paper will first give a short literature review of the terms social capital and happiness and formulate a research hypothesis. Second, this paper will identify and analyze data from the fifth wave of the World Value Survey to assess the relation between social capital and happiness. Finally, the findings will be summarized and policy implications developed.

Literature Review

Social Capital

The origins in the theory of social capital as it is used today can be found in the research of Pierre Bourdieu, Coleman and Robert Putnam (Portes, 1998). All three researchers, however, had slightly different definitions and applications in mind for the broad concept of social capital. The main idea of social capital is that relationships and social networks are important and enable us via trust, collaboration and communication to work efficiently in an environment inherent with uncertainties (Field, 2012). The more precise implications and definitions of social capital, however, vary. Bourdieu, for example, saw social capital in light of the workings of the French society during the 20th century. He defined social capital as “[…] the sum of resources, actual or virtual, that accrue to an individual or a group by virtue of possessing a durable network of more or less institutionalised relationships of mutual acquaintance and recognition.” (Bourdieu & Wacquant, 1992, p. 119). To him, social capital was decisive in explaining the class structures and its stability. James Coleman, on the other hand, was using social capital as a concept in the field of education. In his paper “Social Capital in the Creation of Human Capital” (1988), he examined high school dropout rates with reference to the social capital of the parents of the student. The, by far, most popular and extensive introduction of social capital was conducted by Robert Putnam (Häuber, 2010). According to Putnam 1995, “"social capital" refers to features of social organization such as networks, norms, and social trust that facilitate coordination and cooperation for mutual benefit.” (p. 66). In general, however, little attention has been paid to the relation of social capital and happiness.

Happiness

In recent years, happiness has received increasing attention of different fields of research. Not only did social scientists discover the importance of happiness in terms of our incentives in life, but also economists become aware of the difference of utility and happiness (Dutt & Radcliff, 2009). In the words of Veenhoven, happiness is “the degree to which an individual judges the overall quality of his life favourably” (Veenhoven, 1992, p. 2). Based on this definition, it is apparent that reported happiness is always subjective and is influenced by a variety of factors and effects. Often, happiness is seen as a very important aspect of life and influences our decisions and actions (Greve, 2009). In the literature, used synonyms for happiness are often subjective wellbeing, satisfaction and utility. In general, the definition of these terms is rather general and not applied coherently. Research has analyzed happiness in regards to the level of democracy, freedom and income; still general consensus is not found and different studies show different results (Hagerty & Veenhoven, 2002; Inglehart et al., 2008). During the literature review, however, little research was found in the area of social capital and happiness.

Testing

The research question will be analyzed on a country level, using data from the fifth wave of the World Value Survey (VWS, no date). To ensure a compatible sample and due to data availability, the country selection was solely based on the OECD survey. In order to rule out a spurious relation between social capital and happiness the country sample was controlled for level of democracy and GDP per capita. As mentioned in the literature, both can be significant factors for explaining differences. The level of democracy was measured by the Freedom House Score “Freedom in the World” and consists of one score for political rights and one score for civil liberties (Freedom House, no date). The final score is an average of the two scores and ranges from one to seven. Due to the fact that most of the surveys were conducted in 2005 and 2006 and to ensure comparable data, all values of GDP per capita and Freedom House Scores are averages from the years 2005 and 2006. The data on the GDP per capita was derived from the World Bank (The World Bank, no date). In the process of the sample selection, all OECD countries were ranked according to their GDP per capita and only countries with Freedom House scores of 1 were allowed in the sample. Now the sample could be split into three larger income brackets, each comprising of 9 countries, with high variances in the lower bracket with a range from 8.461 to $27.041 and in the upper bracket, ranging from $40.291 to $85.470. The middle bracket has a much lower variance and ranges from $31.128 to $39.301. Next, the Netherlands were included because the country with the next highest GDP per capita had a 5,6% higher GDP per capita, whereas the distance to the country with the next lower GDP per capita was only -2,5%. Belgium and Austria, marked in grey, could not be analyzed further because they were not part of the fifth wave of the World Value Survey, so that the final sample includes 8 countries.

Table 1

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The first step to assess the relationship of happiness and social capital was to operationalize both concepts by identifying relating questions from the World Value Survey. Hence, this paper will work with the questions V10 of the World Value Survey to measure happiness. V10 directly asks the participant “Taking all things together, would you say you are (read out and code one answer): 1 Very happy, 2 Rather happy, 3 Not very happy, 4 Not at all happy” (VWS, no date, V10). Another possible variable to include could have been life satisfaction. After the thorough literature review, however, happiness and life satisfaction can be seen as distinctly different concepts and comparing these two concepts will not help answering the research question. The operationalization of social capital was based on its main characteristics trust and civic engagement which were identified by Robert Putnam in 1992 and 1995 (Narayan & Cassidy, 2001). Hence, social capital will be measured by using question V23 “Generally speaking, would you say that most people can be trusted or that you need to be very careful in dealing with people? (Code one answer): 1 Most people can be trusted, or 2 Need to be very careful.” (VWS, no date, V23) and question number V24-25, V27-V31 which ask for membership in civic organizations (see appendix). After recoding the answers of the questions V24-V31 (1=active member; 0,5 passive member and 9 for don´t belong) the highest score achievable for all questions relating to social capital was one and the lowest was 0. Therefore, it was possible to average all responses and create one core of social capital ranging from 0 to 1 and including V23-V25 and V27-V31. V26 and V32 were excluded because the literature did not describe these as significant for measuring social capital. V33 was excluded because the data was incomplete. When the aggregated score of social capital and happiness are plotted a positive relationship can be seen. The linear regression has a fit of R2= 0,35 which leads to the conclusion of a light positive relation between happiness and social capital (Graph 1).

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From the first analysis we can see that there is a slight positive relationship of happiness and social capital. We can also see two slight outliers (Finland and France) that will be addressed later. To explain this relationship in more detail, further analyses are needed. In the next step, the measuring of the overall country happiness is examined. In general the expectation is that in countries with higher cores for happiness, more people should report being very happy and less people should report to be not happy at all. In the two bar charts below, it can be seen that this assumption roughly holds true, although unexpectably high shares of people reported to be not happy at all in France and Great Britain.

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In the next step, the relation between happiness and social capital is examined in greater detail. In order to assess the correlation of each part of the aggregated measure of social capital, the correlation of all eight questions to happiness was tested. The table below shows that all questions have positive correlations (Table 2). The extent and significance, however, varies substantial. Surprisingly, the dimension of trust has the lowest correlation value.

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