Does Finance Make Us Less Social?
42 Pages Posted: 22 Aug 2018
Date Written: July 2018
Formal financial contracts and informal risk-sharing agreements within social networks both enable households to manage risk. Using an exogenous reduction in the cost of financial contracting, we find that the increased use of financial contracts to manage household risk is associated with a decline in religious adherence and smaller church congregations. These results indicate that a cost-benefit analysis leads households to replace their participation in social networks with lower-cost financial contracts. Our study contributes toward understanding the implications of emerging technologies known collectively as FinTech that lower the cost of financial contracting.
Keywords: Household Risk Management, Social Networks, FinTech
JEL Classification: G02, G28
Suggested Citation: Suggested Citation