Promoting Subjective Well-Being among Rural and Urban Residents in Indonesia: Does Social Capital Matter?

Abstract

There has been growing research on the link between social capital and subjective well-being. However, to date, research investigating the impact of social capital on subjective well-being based on urban and rural typology is limited. Therefore, to fill this gap, this study aims to examine the effects of social capital on subjective well-being, based on urban and rural typology, using large-scale data from 29,341 Indonesian residents, comprising 17,155 urban residents and 12,186 rural residents. A two-stage predictor substitution (2SPS) approach is applied to address the endogeneity issue in estimating the impact of social capital. The empirical findings indicate that social capital significantly increases subjective well-being, i.e., happiness and life satisfaction. However, based on the urban–rural model, we found that the impact of social capital on subjective well-being is different. In the urban model, social capital increases happiness and life satisfaction significantly. However, the rural model indicates that social capital significantly increases happiness, not life satisfaction. These findings imply that subjective well-being impacts urban residents more than rural residents. The main reason is social capital in urban areas is well-developed (i.e., management and infrastructure for community association). Therefore, we suggest developing social capital in rural areas to expand its role in improving well-being.