The Causal Effects of Social Media on Individual Welfare : A Systematic Review

Abstract

This paper is a systematic literature review submitted as a master thesis to the faculty of Economics at the University of Konstanz in March 2024. The goal of the research was to find, review and, where possible, synthesise all existing literature which quantitatively researches into any causal effect between social media and individual welfare. In order to arrive at a holistic result, I included research from various disciplines (economics, psychology, sociology e.a.) and worked with a broad search strategy concerning the terms ‘social media’, ‘welfare’ and ‘causal effect’ (see chapter I). Social media is pervasive around the world. At the same time a negative correlation with mental health is well-documented in the psychiatric literature. These two facts beg the causal question. However, in a rapid review I conducted before starting the project, I was surprised to find no previous systematic review on the causal effect (though I found 14 reviews on the correlation between social media and welfare). After screening 820 articles from my initial, broad literature search on four different academic databases, 37 articles were included in the review. The core of my text is concerned with reviewing the content and the methods of these articles. Much space is dedicated to evaluating the different methods used for causal identification, revealing some methodological shortcomings and, more importantly, showing which methods can yield exactly what kind of causal effects with respect to social media: randomised controlled trials can only show partial causal mechanisms in this context, whereas natural experiments and willingness-to-accept (WTA) approaches yield catch-all estimates. To all but econometricians, the synthesis of the factual evidence will be more interesting than the methodological discussion. I summarise my findings, somewhat polemically, in Chapter V. Overall, the literature reveals that there are some specific causal channels through which social media use is conducive towards mental health (e.g. it can act as a stress buffer). However, general use, as well as the very existence of social media have significant negative causal effects on individual welfare. At the same time the evidence suggests that, due to addiction and the existence of a ‘market trap’, consumers cannot individually decide to simply ‘opt out’ of social media. This may warrant, if not necessitate, policy intervention.