Abstract

In a society, trust is a crucial factor for efficient cooperation and transactions.Without trust, cooperation is impossible and to prevent cheating the cost of transactions becomes too high. In this sense, it is important to examine the mechanisms of trust formation in a society. In this paper, we further develop the work of Zak and Knack by considering the relationship between trust, happiness, and inequality. The results of the empirical analysis by using cross country data show that higher levels of trust in society increase positive happiness, such as feelings of attainment, and decrease negative happiness, such as feelings of anxiety or anger.