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On the fungibility of public and private transfers: A mental accounting approach

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  • Waidler, Jennifer

    () (UNU-MERIT)

Abstract

A common assumption in economics is that money is fungible. In other words, spending patterns do not depend on the source of income, only on the total amount. The mental accounting theory, however, rejects this assumption by arguing that people compartmentalise their income into different mental accounts and decide on their consumption within each of these accounts. In this paper I hypothesise that households differently associate a private transfer coming from a migrant than a public transfer received from the government, and that this impacts the way transfers are spent. By analysing the first nationally representative longitudinal survey in South Africa, covering the years 2008, 2010 and 2012, I find evidence that public and private transfers are not spent in the same way.

Suggested Citation

  • Waidler, Jennifer, 2016. "On the fungibility of public and private transfers: A mental accounting approach," MERIT Working Papers 060, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  • Handle: RePEc:unm:unumer:2016060
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    File URL: https://www.merit.unu.edu/publications/wppdf/2016/wp2016-060.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Fungibility; Mental Accounting; Remittances; Social transfers; South Africa;

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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