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Peer effects, risk pooling, and status seeking: What explains gift spending escalation in rural China?

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  • Chen, Xi
  • Kanbur, Ravi
  • Zhang, Xiaobo

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.

Suggested Citation

  • Chen, Xi & Kanbur, Ravi & Zhang, Xiaobo, 2011. "Peer effects, risk pooling, and status seeking: What explains gift spending escalation in rural China?," IFPRI discussion papers 1151, International Food Policy Research Institute (IFPRI).
  • Handle: RePEc:fpr:ifprid:1151
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    Cited by:

    1. Meinzen-Dick, Ruth Suseela & van Koppen, Barbara & Behrman, Julia & Karelina, Zhenya & Akamandisa, Vincent & Hope, Lesley & Wielgosz, Ben, 2012. "Putting Gender on the Map: Methods for mapping gendered farm management systems in Sub-Saharan Africa," IFPRI discussion papers 1153, International Food Policy Research Institute (IFPRI).
    2. Chen, Xi & Zhang, Xiaobo, 2017. "Costly Posturing: Ceremonies and Early Child Development in China," IZA Discussion Papers 10662, Institute for the Study of Labor (IZA).
    3. Wang, Ruixin, 2015. "Essays on development economics and public economics," Other publications TiSEM e1779514-5b71-4726-925b-2, Tilburg University, School of Economics and Management.
    4. Chen, Xi, 2014. "Fetus, Fasting, and Festival: The Persistent Effects of in Utero Social Shocks," IZA Discussion Papers 8494, Institute for the Study of Labor (IZA).
    5. repec:kap:theord:v:84:y:2018:i:4:d:10.1007_s11238-017-9619-7 is not listed on IDEAS
    6. Bulte, Erwin & Wang, Ruixin & Zhang, Xiaobo, 2017. "Forced gifts: The burden of being a friend," IFPRI discussion papers 1615, International Food Policy Research Institute (IFPRI).
    7. Elena M. Parilina & Alessandro Tampieri, 2018. "Stability and cooperative solution in stochastic games," Theory and Decision, Springer, vol. 84(4), pages 601-625, June.
    8. Chen, Xi & Zhang, Xiaobo, 2012. "Costly posturing: relative status, ceremonies and early child development in China:," IFPRI discussion papers 1206, International Food Policy Research Institute (IFPRI).
    9. Chen, Xi, 2013. "Relative Deprivation in China," MPRA Paper 48582, University Library of Munich, Germany.
    10. Chen, Xi, 2015. "Status Concern and Relative Deprivation in China: Measures, Empirical Evidence, and Economic and Policy Implications," IZA Discussion Papers 9519, Institute for the Study of Labor (IZA).
    11. Wang, Ruixin, 2016. "Who Should I Share Risk with? Gifts can tell : Theory and Evidence from Rural China," Discussion Paper 2016-003, Tilburg University, Center for Economic Research.
    12. repec:unu:wpaper:wp2012-70 is not listed on IDEAS

    More about this item

    Keywords

    ceremony; gift giving; Peer effect; risk pooling; social network; status seeking;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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