Change in Subjective Well-Being, Affluence and Trust in State Governments in India

The present study explores the relationship between trust in state governments and changes in subjective well-being in India, drawing upon the nationally-representative India Human Development Survey (IHDS) panel data for 2005 and 2012. Our econometric results confirm that people’s trust in state governments is positively associated with changes in their subjective well-being in economic aspects. To take into account the endogeneity of people’s trust in the state government, we have used the 2SLS model where the trust is instrumented by (i) whether the winning legislators belonged to the ruling party, and (ii) whether the margin of victory over the closest rival exceeded 12 %. The robustness of the results has been confirmed by the Lewbel IV model in which the internal instruments are used in addition to the two external instruments. The policy focus in rebuilding trust in state governments destroyed by the relentless pursuit of Hindutva and over-centralisation are discussed.