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Your Friends, Your Credit: Social Capital Measures Derived from Social Media and the Credit Market

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Abstract

Chetty et al. (2022a) introduced an array of social capital measures derived from Facebook friendships and found that one of these indicators, economic connectedness (EC), predicted upward income mobility well. Bricker and Li (2017) proposed the average credit score of a community's residents as an indicator of local social trust. We show in this paper that the average credit scores are robustly correlated with EC, negatively correlated with the friending-bias measure introduced in Chetty et al. (2022b), and predict economic mobility to a comparable extent after controlling for EC. The consistency and complementarity between these two indicators, despite being derived from individuals' activities in distinct contexts, underscore trust as a crucial component of social capital and provide insights that are useful for understanding the formation and accumulation of social capital.

Suggested Citation

  • Jesse Bricker & Geng Li, 2023. "Your Friends, Your Credit: Social Capital Measures Derived from Social Media and the Credit Market," Finance and Economics Discussion Series 2023-048, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:96647
    DOI: 10.17016/FEDS.2023.048
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    1. Raj Chetty & Matthew O. Jackson & Theresa Kuchler & Johannes Stroebel & Nathaniel Hendren & Robert B. Fluegge & Sara Gong & Federico Gonzalez & Armelle Grondin & Matthew Jacob & Drew Johnston & Martin, 2022. "Social capital I: measurement and associations with economic mobility," Nature, Nature, vol. 608(7921), pages 108-121, August.
    2. Goldin, Claudia D. & Katz, Lawrence F., 1999. "Human Capital and Social Capital: The Rise of Secondary Schooling in America, 1910–1940," Scholarly Articles 29429088, Harvard University Department of Economics.
    3. Raj Chetty & Matthew O. Jackson & Theresa Kuchler & Johannes Stroebel & Nathaniel Hendren & Robert B. Fluegge & Sara Gong & Federico Gonzalez & Armelle Grondin & Matthew Jacob & Drew Johnston & Martin, 2022. "Social capital II: determinants of economic connectedness," Nature, Nature, vol. 608(7921), pages 122-134, August.
    4. Jane K. Dokko & Jessica Hayes & Geng Li, 2015. "Credit Scores and Committed Relationships," Finance and Economics Discussion Series 2015-81, Board of Governors of the Federal Reserve System (U.S.).
    5. Durante, Ruben & Mastrorocco, Nicola & Minale, Luigi & Snyder, James, 2023. "Unpacking Social Capital," CEPR Discussion Papers 18024, C.E.P.R. Discussion Papers.
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    More about this item

    Keywords

    social trust; social capital; economic mobility; credit score;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G50 - Financial Economics - - Household Finance - - - General

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