Does social capital matter for subjective well-being in a least developed country context? Using a pseudo-panel approach

While it has been argued that in the least developed societies, due to the weakness of formal institutions, social capital may be significantly linked with well-being, its effect has shown differential effects for individuals with different statuses. Despite this ambiguity, its well-being effects in the least-developed countries, such as Ethiopia, remain under-researched. Moreover, current cross-sectional studies often neglect the influence of various dimensions of social capital on well-being and face problems of endogeneity.To address this gap, we rigorously examine whether the multiple aspects of social capital matter for subjective well-being in Ethiopia. Method: Utilizing a sample of 9,229 individuals from eight waves of the World Gallup Poll survey data, we analyzed the effect of multiple aspects of social capital on subjective well-being. We employ a novel pseudo-panel approach to tackle endogeneity issues using a system-generalized method of moments estimator.Our analysis reveals that perceived support, friendship, and civic engagement significantly affect subjective well-being, exhibiting distinct and counterintuitive effects on life satisfaction and emotional well-being. Social support is a robust predictor of life satisfaction and both positive and negative emotional well-being.Our main findings revolve around the unique results that, though the multiple aspects of social capital positively contributed to subjective well-being, they are not always beneficial for well-being, where friendship opportunities and perceived support inversely affect life satisfaction and positive emotional well-being, respectively. Despite uncovering the positive and adverse effects of social capital on well-being, we recommend that future studies account for the collective dimensions of social capital and test the results with a larger sample size and by examining the mechanisms underlying these effects.By addressing the repeated research calls from the least developed world, the study contributes to the existing literature by strengthening the causal links between social capital and subjective well-being using a pseudo-panel approach that treats independent cross-sectional data as synthetic panels. This could aid policymakers and researchers in clarifying the ambiguity of the well-being effect of social capital while designing targeted interventions to enhance well-being in the least developed countries.