Happiness is a significant aspect of human life, and while economic growth has been considered a key indicator of life quality, research increasingly shows its limitations in explaining happiness levels. This study focuses on the non-market components affecting well-being, specifically examining the role of social trust and social capital in the context of rural China. China's rapid economic growth has not been evenly distributed, leading to a significant rural-urban divide characterized by resource inequality and a lack of comprehensive social security in rural areas. This disparity can result in mistrust, impacting social interaction and well-being. Social capital, particularly strong in rural areas due to close-knit communities, is proposed as a mediator between social trust and happiness. This study addresses a research gap by focusing specifically on rural Chinese residents, providing valuable insights into the determinants of well-being in non-Western, rural, and developing economies.

Existing literature highlights the positive relationship between social trust and happiness across various countries, although the strength of this association varies depending on context and measurement. Studies in developed nations have shown significant positive correlations, while evidence from developing countries, particularly rural China, is less extensive. Regarding social capital, research suggests it plays a key role in influencing well-being, providing resources to cope with stressors and enhancing mental health. In rural China, social capital, particularly in the form of strong social networks, is crucial due to the lack of robust formal institutions. Previous research on social trust and SWB in China largely ignored the mediating role of social capital. This paper expands upon existing studies by employing nationally representative data to examine the direct and indirect effects of trust on happiness via social capital.

This study utilizes data from the Chinese General Social Survey (CGSS) for 2012, 2013, and 2015. The CGSS employs a stratified four-stage unequal probability sampling method, providing a nationally representative sample. The analysis focuses on the rural population, excluding urban residents and samples with missing data. The final sample size consists of 10,014 valid observations. Subjective well-being (SWB) is measured using a 5-point scale adapted from the World Value Surveys, assessing self-reported happiness. Social trust is measured using a composite score derived from two survey questions related to trust in others and the perception of being taken advantage of. Social capital is measured using the entropy evaluation method (EEM) based on social and political relations reported by respondents. This method weights the various aspects of social and political relations to better represent the complexity of social capital. Key aspects include frequency of social gatherings with friends and relatives, participation in community associations, and engagement in political activities. Control variables include age, gender, ethnicity, income, marital status, employment status, social insurance participation, health status, education level, and possession of house, car and investments. An ordered probit model is used to analyze the data due to the ordinal nature of the dependent variable (happiness). The mediating effect of social capital is assessed using the Baron and Kenny (1986) stepwise method, complemented by the Sobel test and bootstrapping to address the limitations of the stepwise method.

The analysis reveals several key findings: 1. **Social trust positively affects happiness**: The study found a significant positive correlation between social trust and happiness among rural residents (β= 0.186, p<0.01). 2. **Social trust positively affects social capital**: Trust also showed a significant positive relationship with social capital (p=0.022, p<0.05). 3. **Social capital mediates the relationship between trust and happiness**: Trust directly influences happiness, but this effect is partially mediated by social capital. The Sobel test and bootstrap analysis confirm this mediating effect. 4. **Heterogeneous effects based on age and market competition**: The mediating effect of social capital is more pronounced among rural residents aged 30 years and older (inclusive), and those residing in areas with high market competition. For younger rural residents, the mediating effect of social capital is not significant. This could be because the social networks of younger rural residents are still under development and they have fewer opportunities to build up political connections. In high-market competition regions, social capital plays a significant role in promoting happiness. 5. **Robustness Test**: A robustness analysis confirmed the relationship between trust, social capital, and SWB, even when using alternate measures of trust and well-being.

The findings support the hypothesis that social trust enhances rural residents' happiness, both directly and indirectly through social capital. The mediating role of social capital highlights the importance of social networks and community engagement in improving well-being. The age and market competition heterogeneity reveals that the impact of social capital varies according to life stage and economic environment. Older individuals and those in more dynamic economic settings benefit more from social capital. These results align with theoretical frameworks emphasizing the importance of social resources for happiness and highlight the unique role of social capital in the context of rural China. The observed relationship between economic factors (income) and happiness challenges the “Easterlin paradox” in this context, possibly due to the ongoing economic development in rural China and increased access to basic resources.

This study demonstrates that social trust and social capital are crucial determinants of SWB among rural residents in China. The mediating role of social capital highlights the potential for interventions aimed at strengthening social networks and fostering community engagement to improve well-being. Future research could investigate the specific mechanisms through which social capital affects happiness, explore the impact of different types of social capital, and investigate the generalizability of these findings to other developing countries.

While this study uses a large, nationally representative dataset, several limitations exist. The cross-sectional nature of the data limits the ability to establish causal relationships definitively. The reliance on self-reported data might introduce measurement error. Future research employing longitudinal data and more nuanced measures of social capital would enhance the study's explanatory power. The study also focuses on specific measures of social capital, and further research might broaden the scope to include other aspects of social connections and community participation. The cultural context of rural China might also limit the generalizability of the findings to other cultural and economic environments.