Accounting for social spending escalation in rural China
It has been widely recognized that the poor spends a significant proportion of their income on social spending even at the expense of basic consumption. What are the motives behind the observed lavish social spending among the poor? We attempt to test three competing explanations at the social link level, risk-pooling, peer effect, and status concern, via a uniform framework based on a unique primary dataset. The data set include household information from a three-wave census-type household survey as well as a long-term gift record for all households in three villages in a poor region in rural China. Our dyadic estimations confirm the prevalence of peer influence and the status seeking motive in shaping gift spending and its rapid growth, while risking pooling is not a significant explanatory factor. A 1% increase in peers' gift spending per occasion leads to a 0.13% - 0.34% increase in one's own gift per occasion, depending on whether household fixed effect or pairwise fixed effect dyadic model is estimated. Status seeking for the bottom 25% and the middle 50% groups significantly pushes up gift expenditure. Moreover, large windfall income and marriage market pressure further intensify status competition, escalating gift giving behavior.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Postal: Theodor-Lieser-Strasse 2, 06120 Halle(Saale)|
Phone: (+49) (0) 345 / 29 28 0
Fax: (+49) (0) 345 / 29 28 199
Web page: http://www.iamo.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brown, Philip H. & Bulte, Erwin & Zhang, Xiaobo, 2010.
"Positional spending and status seeking in rural China,"
IFPRI discussion papers
983, International Food Policy Research Institute (IFPRI).
- Brown, Philip H. & Bulte, Erwin & Zhang, Xiaobo, 2011. "Positional spending and status seeking in rural China," Journal of Development Economics, Elsevier, vol. 96(1), pages 139-149, September.
- Santos, Paulo & Barrett, Christopher B., 2010. "Identity, Interest and Information Search in a Dynamic Rural Economy," World Development, Elsevier, vol. 38(12), pages 1788-1796, December.
- Chen, Xi & Zhang, Xiaobo, 2011. "Costly posturing: Relative status, ceremonies and early child development," IAMO Forum 2011: Will the "BRICs Decade" Continue? – Prospects for Trade and Growth 7, Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO).
- Brock,W.A. & Durlauf,S.N., 2004.
"Identification of binary choice models with social interactions,"
2, Wisconsin Madison - Social Systems.
- Brock, William A. & Durlauf, Steven N., 2007. "Identification of binary choice models with social interactions," Journal of Econometrics, Elsevier, vol. 140(1), pages 52-75, September.
- Marcel Fafchamps & Flore Gubert, 2005.
"The Formation of Risk Sharing Networks,"
Economics Series Working Papers
GPRG-WPS-037, University of Oxford, Department of Economics.
- Antoni Calvo-Armengol & Eleonora Patacchini & Yves Zenou, 2008.
"Peer Effects and Social Networks in Education,"
CReAM Discussion Paper Series
0814, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
- Calvó-Armengol, Antoni & Patacchini, Eleonora & Zenou, Yves, 2008. "Peer Effects and Social Networks in Education," IZA Discussion Papers 3859, Institute for the Study of Labor (IZA).
- Calvó-Armengol, Antoni & Patacchini, Eleonora & Zenou, Yves, 2008. "Peer Effects and Social Networks in Education," CEPR Discussion Papers 7060, C.E.P.R. Discussion Papers.
- Joel Waldfogel, 2002. "Gifts, Cash, and Stigma," Economic Inquiry, Western Economic Association International, vol. 40(3), pages 415-427, July.
When requesting a correction, please mention this item's handle: RePEc:zbw:iamo11:6. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.