Gifts, Cash, and Stigma

Abstract

Each year individuals in the U.S. transfer between $50 and $72 billion in resources to friends and family members in the form of noncash holiday gifts, despite the fact that holiday gift recipients apparently value their noncash gifts at about ten percent less than the prices paid by the givers. Using a new data set on 2400 holiday gifts, we document that cash giving is more likely from givers who tend to give unwanted gifts, indicating that givers are concerned with the utility of their recipients and, in turn, that the decision to give cash is economic. While cash gifts are more likely from less efficient noncash gift givers, they are nevertheless surprisingly rare. The rarity of cash gifts can be rationalized by a stigma of cash giving that we are able to parameterize and estimate using a simple structural model. We estimate that givers behave as if the stigma were roughly $3, plus half the cost of amount allocated to giving.

Keywords: gift giving, inter vivos transfers

JEL Classification: D61, D11