Google searches: A mirror of state development?

Abstract

This thesis examines the potential relationship between the level of state development in the United States and the interest shown towards finance topics and finance products as meas-ured by Google Trends Search Volume Interest (SVI). By ranking the 50 states through a State Development indicator score, including such measures as unemployment rate, per cap-ita income and GDP, education attainment (high school and bachelor’s), and a democracy index, the ranking of states was compared to the SVI for selected finance-related search terms. The state development data was gathered through the Bureau of Economic Analysis, the FED of St. Louis, the U.S. Bureau of Labor Statistics, and Jacob Grumbach’s website, who is the author of the democracy index. The sample period is from 2004 to 2022.

The potential relationship was examined both through a correlation analysis and time-series analysis, which included Granger Causality and Vector Autoregression tests. The correlation analysis included search terms such as Inflation, Interest Rate, Bonds, and ETF, as well as interrogative search terms such as “What is Inflation?” and “What is Investing?”. The time-series analysis included search terms such as Market Bubble and Recession.

The results of this paper suggest that a relationship between the level of state development and SVI towards finance-related topics exists. The correlation analysis provided evidence of a positive correlation between search terms related to finance topics and finance products and the level of state development while showing a negative correlation between stated development and interrogative search terms, suggesting that higher-developed states show more interest towards finance-related topics, while lower-developed states more often add interrogative terms to finance-related topics. The results of the time-series analysis were less conclusive, nevertheless suggesting that it cannot be expected that the SVI of higher-developed states can predict the future SVI of lower-developed states, or vice versa.