Measuring Social Connectedness

Michael Bailey, Ruiqing (Rachel) Cao, Theresa Kuchler, Johannes Stroebel, Arlene Wong

NBER Working Paper No. 23608
Issued in July 2017
NBER Program(s):Asset Pricing, Corporate Finance, Development of the American Economy, Economic Fluctuations and Growth, International Trade and Investment, Law and Economics, Labor Studies, Public Economics, Productivity, Innovation, and Entrepreneurship

We introduce a new measure of social connectedness between U.S. county-pairs, as well as between U.S. counties and foreign countries. Our measure, which we call the "Social Connectedness Index" (SCI), is based on the number of friendship links on Facebook, the world's largest online social networking service. Within the U.S., social connectedness is strongly decreasing in geographic distance between counties: for the population of the average county, 62.8% of friends live within 100 miles. The populations of counties with more geographically dispersed social networks are generally richer, more educated, and have a higher life expectancy. Region-pairs that are more socially connected have higher trade flows, even after controlling for geographic distance and the similarity of regions along other economic and demographic measures. Higher social connectedness is also associated with more cross-county migration and patent citations. Social connectedness between U.S. counties and foreign countries is correlated with past migration patterns, with social connectedness decaying in the time since the primary migration wave from that country. Trade with foreign countries is also strongly related to social connectedness. These results suggest that the SCI captures an important role of social networks in facilitating both economic and social interactions. Our findings also highlight the potential for the SCI to mitigate the measurement challenges that pervade empirical research on the role of social interactions across the social sciences.

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Document Object Identifier (DOI): 10.3386/w23608

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