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Money or in-kind gift? Evidence from red packets in China

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  • Hudik, Marek
  • Fang, Eddy S.

Abstract

In Western societies, in-kind gifts are generally more common than money gifts. However, exchange of in-kind gifts potentially involves inefficiency. Several models have been suggested to explain the in-kind gift-giving practice as a rational behaviour under certain assumptions about givers’ preferences and information and/or technological constraints. Unlike many Western societies, China has a long tradition of money gift-giving. So-called red packets are commonly exchanged. We argue that models developed to rationalise Western norms of gift-giving cannot fully account for Chinese gift-giving practices, and some Chinese practices even contradict existing theories. We collect Chinese household data through two surveys to establish stylised facts about gift-giving. We find that money gifts are commonly appropriate, depending on the occasion and relationship between givers and receivers. Moreover, for every occasion and relationship, money is more appropriate than gift vouchers. Finally, unlike studies focusing on Western gift-giving, our study finds no evidence that givers need to compensate receivers with higher value when giving money gifts rather than in-kind gifts. Our results are consistent with the view that the acceptability of money vis-à-vis in-kind gifts is governed primarily by social convention rather than information and technological constraints or the specific preferences of givers.

Suggested Citation

  • Hudik, Marek & Fang, Eddy S., 2020. "Money or in-kind gift? Evidence from red packets in China," Journal of Institutional Economics, Cambridge University Press, vol. 16(5), pages 731-746, October.
  • Handle: RePEc:cup:jinsec:v:16:y:2020:i:5:p:731-746_11
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    References listed on IDEAS

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    1. Henrich, Joseph & Boyd, Robert & Bowles, Samuel & Camerer, Colin & Fehr, Ernst & Gintis, Herbert (ed.), 2004. "Foundations of Human Sociality: Economic Experiments and Ethnographic Evidence from Fifteen Small-Scale Societies," OUP Catalogue, Oxford University Press, number 9780199262052, Decembrie.
    2. Robben, Henry S. J. & Verhallen, Theo M. M., 1994. "Behavioral costs as determinants of cost perception and preference formation for gifts to receive and gifts to give," Journal of Economic Psychology, Elsevier, vol. 15(2), pages 333-350, June.
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    Cited by:

    1. Boou Chen & Chunkai Zhao, 2021. "Poverty reduction in rural China: Does the digital finance matter?," PLOS ONE, Public Library of Science, vol. 16(12), pages 1-27, December.
    2. Nie, Peng & Li, Qiaoge & Ding, Lanlin & Sousa-Poza, Alfonso, 2023. "Housing Unaffordability and Adolescent Academic Achievement in Urban China," IZA Discussion Papers 16386, Institute of Labor Economics (IZA).
    3. Angela Ambrosino & Paolo Silvestri, 2020. "Hodgson: An Institution Across Disciplinary Barriers," Annals of the Fondazione Luigi Einaudi. An Interdisciplinary Journal of Economics, History and Political Science, Fondazione Luigi Einaudi, Torino (Italy), vol. 54(2), pages 329-348, December.
    4. Jeremy Kwok Frsa, "undated". "An institutional economic perspective on management in Chinese cultural contexts," Review of Socio - Economic Perspectives 202305, Reviewsep.
    5. Daum-Avital, Liora & Azar, Ofer H., 2023. "Courtesy versus efficiency: Personal gifts and monetary gifts – Preferences and norms in Israeli society," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 104(C).

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