The Importance of Institutional Trust in Explaining Life-Satisfaction: Lessons From the 2008 Global Financial Crisis

ABSTRACT

We theorize that greater institutional trust leads to higher levels of life satisfaction and test our hypothesis empirically on a diverse sample of 27 countries for the period of the 2008 Global Financial Crisis and its aftermath. We used country-level data with a time-series cross-sectional design to examine how changes in institutional trust over the period of the crisis and beyond affected changes in life satisfaction vis-à-vis well-established predictors of institutional trust. We found that institutional trust, together with a subjective assessment of the economic situation, is the only significant predictors explaining life satisfaction during the crisis and its aftermath. The magnitude of the effect of institutional trust demonstrates resilience and did not change due to the crisis. The results of individual-level analysis confirmed this conclusion. The individual-level analysis also highlights that the effect of institutional trust is relatively stronger than the effect of many well-established individual-level characteristics. The main theoretical conclusion of our study is that institutional trust is one of the most important determinants of life satisfaction. Policy makers and international donors should focus on nurturing institutional trust through institutional reforms. From the research standpoint, our findings suggest that institutional trust should be included as one of the covariates in studies on life satisfaction.

KEYWORDS:

• quality of life
• subjective well-being
• Eastern Europe
• Caucasus
• Central Asia

Disclosure Statement

No potential conflict of interest was reported by the authors.

Notes

1. A similarly broad definition of institutional trust is also commonly employed in studies conducted in the developing countries of Africa (Lavallée et al., 2008), Asia (Wong and Hsiao, 2011), and Latin America (Seligson, 2002). Also, similar broad definition of institutional trust is employed when comparisons between regions (e.g., including regions with developed and developing countries) are examined (Clausen et al., 2011). To highlight this point, we reestimated our analysis using a rather restrictive index of institutional trust that includes only trust toward the government, parliament, political parties, and courts, and found that it was not a significant predictor of life satisfaction (see Appendix A).

Additional information

Notes on contributors

Nazim Habibov

Dr. Nazim Habibov is affiliated with the School of Social Work, University of Windsor, Windsor, Ontario, Canada, e-mail: [email protected].

Alena Auchynnikava

Alena Auchynnikava is affiliated with the School of Social Work, University of Windsor, Windsor, Ontario, Canada, e-mail: [email protected].

Rong Luo

Rong Luo is affiliated with the Department Mathematics and Statistics, University of Windsor, Windsor, Ontario, Canada, e-mail: [email protected].

Lida Fan

Dr. Lida Fan is affiliated with the School of Social Work, Lakehead University, Thunder Bay, Ontario, Canada, e-mail: [email protected].