Social relations and economic welfare at an individual level

Over the last few years, many studies have shown that social networks are important to the economic progress and the development of societies. In order to explain the determinants of social network formation, it is important to understand the motivations characterising the decisions of single agents with respect to their social behaviour. This paper presents evidence, through Italian microdata representative of the entire Italian population, that the quality and quantity of interpersonal relations of agents can increase their economic welfare. The analysis proposed seems to indicate that individuals also have an economic incentive to invest in social relations. Two proxies of interpersonal relations at an individual level are used. The first one, that is considered as a proxy for formal social relations, reflects the propensity of individuals to participate in different groups. The second one, that is interpreted as a proxy for the informal social relations, reflects the level of satisfaction of personal relationships of single agents with friends. This proxy is very useful to capture the quantitative aspects of informal interpersonal relations and the qualitative ones. Both formal and informal social relations of single agents seem to have a positive effect on their level of household economic welfare. This result proves robust to the inclusion of a variety of control variables and the use of different econometric methods.