Local spillovers and learning from neighbors: Evidence from durable adoptions in rural China

Using the 1999 durable consumption survey data in rural China, we examine the importance of local spillovers in the diffusion of three major durable goods, i.e., color television set, washing machine, and refrigerator. We find that, with control for many family characteristics, a household is more likely to buy its first durable good in villages where a large share of households already own one. Further evidence suggests that theses patterns are unlikely to be explained by unobserved local characteristics. When examined in more detail, the extent of local spillovers appears to be negatively related to a household’s knowledge about the product, and positively related to its education level. Both are consistent with the hypothesis that learning from neighbors plays an important role of these spillovers.