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Can money buy friends? Evidence from a natural experiment

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  • Nguyen, Cuong Viet

Abstract

This study examines the causal effect of positive income shocks on friendships in Vietnam. We measure income shock by respondents’ lottery prizes, controlling for spending on the lottery. We find a positive effect from lottery winnings on the number of friends. People tend to increase the number of their non-colleague and long-term friends, rather than the number of friends among colleagues or new friends. The elasticity of the number of friends with respect to lottery winnings is estimated at 0.05%. Our estimate implies that the income shock needed to purchase one additional friend is nearly 5,000 USD.

Suggested Citation

  • Nguyen, Cuong Viet, 2021. "Can money buy friends? Evidence from a natural experiment," European Economic Review, Elsevier, vol. 136(C).
    • Handle: RePEc:eee:eecrev:v:136:y:2021:i:c:s0014292121001008
    DOI: 10.1016/j.euroecorev.2021.103747
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    Cited by:

    1. Joan Costa-Font & Nattavudh Powdthavee, 2023. "Does money strengthen our social ties? Longitudinal evidence of lottery winners," Rationality and Society, , vol. 35(2), pages 139-166, May.

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    More about this item

    Keywords

    Friendship; Social connection; Income shocks; Lottery prizes;
    All these keywords.

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • D1 - Microeconomics - - Household Behavior
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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