Is Economic Connectedness Likely to Raise Environmental Footprint?

Economic connectedness has been recently found to lower income inequality by rising intergenerational mobility, yet its environmental impacts are less well known. More well-known is the fact that the non-carbon footprint is easier to reach via regulations because its production is domestic. These two problems of income inequality and environmental pollution have echoed in public opinion polls as one of the major current problems in developed countries. We thereby look at the United States on the state level during the last two decades (2010 – 2020) with a Hausman-Taylor estimator for panel data. The choice of the estimator stems from its appropriateness for panel datasets with constant variables. We find that in the United States, economic connectedness between friends, whereby friendships were formed within the same group, may be blamed for the rising environmental (noncarbon) footprint. Noncarbon footprint is, therefore, explained by the bonding of social capital, which may restrict innovation. The policy implications are discussed, and a call is made to distinguish social capital types and promote bridging social capital where bonding social capital is relatively strong.