Social ties and the demand for financial services

Citation

Patacchini, Eleonora & Rainone, Edoardo (2017). Social ties and the demand for financial services. Journal of Financial Services Research. vol. 52 (1) pp. 35-88

Abstract

This paper studies the importance of social interactions for the adoption of financial services among young adults. Specifically, we investigate whether, how, and why financial decisions among interacting agents are correlated. We exploit a unique dataset of friendship networks in the United States and a novel estimation strategy that accounts for possibly endogenous network formation. We find that not all social contacts are equally important: only long-lasting relationships influence financial decisions. Moreover, this peer influence exists only in cohesive social structures. This evidence is consistent with an important role of trust in financial decisions. When agents consider whether or not to adopt a financial instrument, they face a risk and may place greater value on information coming from agents they trust. These results can help explain the importance of face-to-face social contacts for financial decisions.

URL

https://doi.org/10.1007/s10693-017-0279-0

Reference Type

Journal Article

Journal Title

Journal of Financial Services Research

Author(s)

Patacchini, Eleonora
Rainone, Edoardo

Year Published

2017

Volume Number

52

Issue Number

1

Pages

35-88

Edition

June 7, 2017

ISSN/ISBN

1573-0735

DOI

10.1007/s10693-017-0279-0

Reference ID

9246