Raj Chetty on Social Capital and Economic Mobility

On Thursday, September 8, Raj Chetty joined Markus’ Academy for a lecture. Chetty is the William A. Ackman Professor of Economics at Harvard University and the Director of Opportunity Insights.

Watch the full presentation below. You can also watch all Markus’ Academy webinars on the Markus’ Academy YouTube channel.

Timestamps:

[0:00] Introductory Remarks
[7:13] Earlier work on upward mobility
[13:02] Measurement of social capital
[35:06] Association with Economic Mobility
[52:55] Determinants of Economic Connectedness
[1:10:06] Targeting interventions

Executive Summary

• [0:00] Introductory Remarks: Measures of economic mobility tell us children’s likelihood of rising up in the income distribution over their lifetimes. Average levels of economic mobility can be measured separately for different groups of children in order to show how kids’ long-run trajectories vary across different races and ethnicities, genders, and even across different neighborhoods. By using anonymized census and tax records to measure economic mobility separately for each neighborhood in the United States, researchers have revealed that the areas where low-income children have the greatest shot at achieving upward mobility tend to share the following characteristics in common: High-mobility areas typically have lower poverty rates, better school quality, less income inequality and spatial segregation, and more social capital.
• [13:02] Measurement of social capital. To date, researchers’ ability to measure social capital systematically has been limited by a lack of data on peoples’ networks. The work presented here addresses this challenge by using privacy-protected data on 21 billion Facebook friendships in order to measure social capital for each ZIP code, high school, and college in the United States.
• [35:06] Association with Economic Mobility. Of the three different types of “social capital” that they measured, researchers found that economic connectedness was most strongly correlated with levels of economic mobility. Economic connectedness captures the degree of cross-class friendships in a given network, such that neighborhoods with greater economic connectedness are those where low-income residents have a greater share of high-income friends. Researchers theorize that cross-class connections increase low-income children’s chances of achieving upward mobility through shaping their aspirations, increasing their access to information, and providing them with direct referrals to career and educational opportunities. Building on earlier work that analyzes the outcomes of children whose families moved across areas, researchers estimate that if children with low-income parents were to grow up in counties with economic connectedness comparable to that of the average child with high income parents, their incomes in adulthood would increase by 20% on average.
• [52:55] Determinants of Economic Connectedness. A network’s level of economic connectedness is shaped by two components. The first is exposure, or simply the share of high-income individuals in the network. The second is friending bias, or the likelihood that high- and low-income people who meet each other in a setting such as a school or neighborhood become friends. The current social disconnection between high- and low-income people is due in equal measure to low levels of exposure and high levels of friending bias.
  [1:10:06] Targeting interventions. Researchers measured average levels of friending bias and exposure for each ZIP code, high school, and college in the United states. These estimates provide direction on the best way to increase economic connectedness across different settings, either through increasing exposure in highly-segregated networks, or decreasing friending bias in integrated networks that still exhibit relatively few cross-class friendships.