Abstract

http://ssrn.com/abstract=1988708
 


 



Peer Effects, Risk Pooling, and Status Seeking: What Explains Gift Spending Escalation in Rural China?


Xi Chen


Yale School of Public Health; Yale University - Department of Economics; Yale University - Yale Institution for Social and Policy Studies; IZA

Ravi Kanbur


Cornell University - School of Applied Economics and Management; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Xiaobo Zhang


International Food Policy Research Institute (IFPRI)

January 2012

CEPR Discussion Paper No. DP8777

Abstract:     
It has been widely documented that the poor spend a significant proportion of their income on gifts even at the expense of basic consumption. We test three competing explanations of this phenomenon - peer effect, status concern, and risk pooling - based on a census-type primary household survey in three natural villages in rural China and on detailed household records of gifts received on major occasions. We show that gift-giving behavior is largely influenced by peers in reference groups. Status concern is another key motive for keeping up with the Joneses in extending gifts. In particular, poor families with sons spend more on gift giving in proportion to their income than their rich counterparts, in response to the tightening marriage market. In contrast, risk pooling does not seem to be a key driver of the observed gift-giving patterns. However, we show that large windfall income triggers the escalation of competitive gift-giving behavior.

Number of Pages in PDF File: 43

Keywords: ceremony, gift giving, peer effects, risk pooling, social network, status seeking

JEL Classification: D63, D85, R20


Date posted: January 20, 2012  

Suggested Citation

Chen, Xi and Kanbur, Ravi and Zhang, Xiaobo, Peer Effects, Risk Pooling, and Status Seeking: What Explains Gift Spending Escalation in Rural China? (January 2012). CEPR Discussion Paper No. DP8777. Available at SSRN: http://ssrn.com/abstract=1988708

Contact Information

Xi Chen (Contact Author)
Yale School of Public Health ( email )
Yale University - Department of Economics ( email )
28 Hillhouse Ave
New Haven, CT 06520-8268
United States
Yale University - Yale Institution for Social and Policy Studies ( email )
77 Prospect Street
New Haven, CT 06520
United States
HOME PAGE: http://isps.yale.edu/team/xi-chen
IZA ( email )
Ravi Kanbur
Cornell University - School of Applied Economics and Management ( email )
248 Warren Hall
Ithaca, NY 14853
United States
607-255-7966 (Phone)
607-255-9984 (Fax)
HOME PAGE: http://www.people.cornell.edu/pages/sk145/
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany

Xiaobo Zhang
International Food Policy Research Institute (IFPRI) ( email )
2033 K Street, NW
Washington, DC 20006
United States
202-862-5677 (Phone)
202-467-4439 (Fax)

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