Friends with Benefits: Social Capital and Household Financial Behavior
Using friendship data from Facebook, we find that among three aspects of social capital, Economic Connectedness — the fraction of one’s social network with high income — has the strongest relationship with stock market and saving participation. One standard-deviation greater Economic Connectedness is associated with 10.6 percentage points greater stock market participation and 9.2 percentage points greater saving participation. Evidence from income shocks to non-local friends suggests that the relationship is causal. Decomposing this result, we find that the association of Economic Connectedness with participation derives from exposure to wealthy individuals rather than from class-based friending propensities.
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Copy CitationBrad Cannon, David Hirshleifer, and Joshua Thornton, "Friends with Benefits: Social Capital and Household Financial Behavior," NBER Working Paper 32186 (2024), https://doi.org/10.3386/w32186.Download Citation
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