IDEAS home Printed from https://ideas.repec.org/a/eee/eecrev/v136y2021ics0014292121001008.html
   My bibliography  Save this article

Can money buy friends? Evidence from a natural experiment

Author

Listed:
  • Nguyen, Cuong Viet

Abstract

This study examines the causal effect of positive income shocks on friendships in Vietnam. We measure income shock by respondents’ lottery prizes, controlling for spending on the lottery. We find a positive effect from lottery winnings on the number of friends. People tend to increase the number of their non-colleague and long-term friends, rather than the number of friends among colleagues or new friends. The elasticity of the number of friends with respect to lottery winnings is estimated at 0.05%. Our estimate implies that the income shock needed to purchase one additional friend is nearly 5,000 USD.

Suggested Citation

  • Nguyen, Cuong Viet, 2021. "Can money buy friends? Evidence from a natural experiment," European Economic Review, Elsevier, vol. 136(C).
    • Handle: RePEc:eee:eecrev:v:136:y:2021:i:c:s0014292121001008
    DOI: 10.1016/j.euroecorev.2021.103747
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0014292121001008
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.euroecorev.2021.103747?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Cuong Viet Nguyen, 2021. "Old-Age Pensions in a Lower Middle-Income Country: Economic or Psychological Effects?," Economic Development and Cultural Change, University of Chicago Press, vol. 69(3), pages 1165-1202.
    2. Joshua D. Angrist & Alan B. Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 69-85, Fall.
    3. Sacerdote, Bruce, 2011. "Peer Effects in Education: How Might They Work, How Big Are They and How Much Do We Know Thus Far?," Handbook of the Economics of Education, in: Erik Hanushek & Stephen Machin & Ludger Woessmann (ed.), Handbook of the Economics of Education, edition 1, volume 3, chapter 4, pages 249-277, Elsevier.
    4. Manning, W. G. & Duan, N. & Rogers, W. H., 1987. "Monte Carlo evidence on the choice between sample selection and two-part models," Journal of Econometrics, Elsevier, vol. 35(1), pages 59-82, May.
    5. David Marmaros & Bruce Sacerdote, 2006. "How Do Friendships Form?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(1), pages 79-119.
    6. Gordon B. Dahl & Katrine V. L?ken & Magne Mogstad, 2014. "Peer Effects in Program Participation," American Economic Review, American Economic Association, vol. 104(7), pages 2049-2074, July.
    7. Konrad B. Burchardi & Tarek A. Hassan, 2013. "The Economic Impact of Social Ties: Evidence from German Reunification," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(3), pages 1219-1271.
    8. Peter Kuhn & Peter Kooreman & Adriaan Soetevent & Arie Kapteyn, 2011. "The Effects of Lottery Prizes on Winners and Their Neighbors: Evidence from the Dutch Postcode Lottery," American Economic Review, American Economic Association, vol. 101(5), pages 2226-2247, August.
    9. Michael Bailey & Rachel Cao & Theresa Kuchler & Johannes Stroebel & Arlene Wong, 2018. "Social Connectedness: Measurement, Determinants, and Effects," Journal of Economic Perspectives, American Economic Association, vol. 32(3), pages 259-280, Summer.
    10. Nattavudh Powdthavee, 2010. "How much does money really matter? Estimating the causal effects of income on happiness," Empirical Economics, Springer, vol. 39(1), pages 77-92, August.
    11. Erik Lindqvist & Robert Östling & David Cesarini, 2020. "Long-Run Effects of Lottery Wealth on Psychological Well-Being," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(6), pages 2703-2726.
    12. Angrist, Joshua D, 2001. "Estimations of Limited Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(1), pages 2-16, January.
    13. Matthew O. Jackson & Brian W. Rogers & Yves Zenou, 2017. "The Economic Consequences of Social-Network Structure," Journal of Economic Literature, American Economic Association, vol. 55(1), pages 49-95, March.
    14. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
    15. Carina Mood & Jan O. Jonsson, 2016. "Erratum to: The Social Consequences of Poverty: An Empirical Test on Longitudinal Data," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 128(2), pages 499-499, September.
    16. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769.
    17. David Cesarini & Erik Lindqvist & Matthew J. Notowidigdo & Robert Östling, 2017. "The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries," American Economic Review, American Economic Association, vol. 107(12), pages 3917-3946, December.
    18. Gardner, Jonathan & Oswald, Andrew J., 2007. "Money and mental wellbeing: A longitudinal study of medium-sized lottery wins," Journal of Health Economics, Elsevier, vol. 26(1), pages 49-60, January.
    19. Guido W. Imbens & Donald B. Rubin & Bruce I. Sacerdote, 2001. "Estimating the Effect of Unearned Income on Labor Earnings, Savings, and Consumption: Evidence from a Survey of Lottery Players," American Economic Review, American Economic Association, vol. 91(4), pages 778-794, September.
    20. Melıkşah Demır & Lesley Weitekamp, 2007. "I am so Happy ’Cause Today I Found My Friend: Friendship and Personality as Predictors of Happiness," Journal of Happiness Studies, Springer, vol. 8(2), pages 181-211, June.
    21. Peter Lanjouw & Marleen Marra & Cuong Nguyen, 2017. "Vietnam’s Evolving Poverty Index Map: Patterns and Implications for Policy," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 133(1), pages 93-118, August.
    22. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097, Elsevier.
    23. Carina Mood & Jan O. Jonsson, 2016. "The Social Consequences of Poverty: An Empirical Test on Longitudinal Data," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 127(2), pages 633-652, June.
    24. Zhuan Pei & Jörn-Steffen Pischke & Hannes Schwandt, 2019. "Poorly Measured Confounders are More Useful on the Left than on the Right," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 37(2), pages 205-216, April.
    25. Markussen, Thomas & Tarp, Finn, 2014. "Political connections and land-related investment in rural Vietnam," Journal of Development Economics, Elsevier, vol. 110(C), pages 291-302.
    26. repec:fth:prinin:455 is not listed on IDEAS
    27. Julianne Holt-Lunstad & Timothy B Smith & J Bradley Layton, 2010. "Social Relationships and Mortality Risk: A Meta-analytic Review," PLOS Medicine, Public Library of Science, vol. 7(7), pages 1-1, July.
    28. Ed Diener & Robert Biswas-Diener, 2002. "Will Money Increase Subjective Well-Being?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 57(2), pages 119-169, February.
    29. Bruce Sacerdote, 2001. "Peer Effects with Random Assignment: Results for Dartmouth Roommates," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(2), pages 681-704.
    30. Melikşah Demir & Lesley Weitekamp, 2007. "I am so Happy `cause Today I found my Friend: Friendship and Personality as Predictors of Happiness," Journal of Happiness Studies, Springer, vol. 8(2), pages 213-213, June.
    31. Hjalmarsson, Simon & Mood, Carina, 2015. "Do poorer youth have fewer friends? The role of household and child economic resources in adolescent school-class friendships," Children and Youth Services Review, Elsevier, vol. 57(C), pages 201-211.
    32. Scott Hankins & Mark Hoekstra, 2011. "Lucky in Life, Unlucky in Love?: The Effect of Random Income Shocks on Marriage and Divorce," Journal of Human Resources, University of Wisconsin Press, vol. 46(2), pages 403-426.
    33. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
    34. Joshua Angrist & Alan Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Working Papers 834, Princeton University, Department of Economics, Industrial Relations Section..
    35. Duan, Naihua, et al, 1983. "A Comparison of Alternative Models for the Demand for Medical Care," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(2), pages 115-126, April.
    36. Angrist, Joshua D, 2001. "Estimations of Limited Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(1), pages 27-28, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Joan Costa-Font & Nattavudh Powdthavee, 2023. "Does money strengthen our social ties? Longitudinal evidence of lottery winners," Rationality and Society, , vol. 35(2), pages 139-166, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Long Thanh Giang & Cuong Viet Nguyen & Hoa Quynh Nguyen, 2020. "The Impacts of Economic Growth and Governance on Migration: Evidence from Vietnam," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 32(4), pages 1195-1229, September.
    2. Cuong Viet Nguyen & Finn Tarp, 2023. "Cash Transfers and Labor Supply: New Evidence on Impacts and Mechanisms," DERG working paper series 23-18, University of Copenhagen. Department of Economics. Development Economics Research Group (DERG).
    3. Arouri, Mohamed & Ben Youssef, Adel & Nguyen, Cuong, 2017. "Does urbanization reduce rural poverty? Evidence from Vietnam," Economic Modelling, Elsevier, vol. 60(C), pages 253-270.
    4. Nguyen, Cuong Viet, 2021. "Do weather extremes induce people to move? Evidence from Vietnam," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 118-141.
    5. Long Thanh Giang & Cuong Viet Nguyen & Tuyen Quang Tran & Vu Thieu, 2017. "Does Firm Agglomeration Matter to Labor and Education of Local Children? Evidence in Vietnam," Child Indicators Research, Springer;The International Society of Child Indicators (ISCI), vol. 10(4), pages 1015-1041, December.
    6. Nguyen, Cuong, 2012. "Does Urbanization Help Poverty Reduction in Rural Areas?Evidence from a Developing Country," MPRA Paper 48660, University Library of Munich, Germany.
    7. Dang, Hai-Anh H. & Hiraga, Masako & Viet Nguyen, Cuong, 2022. "Childcare and maternal employment: Evidence from Vietnam," World Development, Elsevier, vol. 159(C).
    8. Nguyen Viet Cuong, 2014. "Does Urbanization Help Poverty Reduction in Rural Areas? Evidence from a Developing Country," Working Papers 2014-178, Department of Research, Ipag Business School.
    9. Kim, Seonghoon & Koh, Kanghyock, 2021. "The effects of income on health: Evidence from lottery wins in Singapore," Journal of Health Economics, Elsevier, vol. 76(C).
    10. Cuong Viet Nguyen, 2022. "The effect of preschool attendance on Children's health: Evidence from a lower middle‐income country," Health Economics, John Wiley & Sons, Ltd., vol. 31(8), pages 1558-1589, August.
    11. Nguyen, Cuong Viet & Nguyen, Hoa Quynh, 2015. "Do internal and international remittances matter to health, education and labor of children and adolescents? The case of Vietnam," Children and Youth Services Review, Elsevier, vol. 58(C), pages 28-34.
    12. Mont, Daniel & Nguyen, Cuong, 2013. "Does Parental Disability Matter to Child Education? Evidence from Vietnam," World Development, Elsevier, vol. 48(C), pages 88-107.
    13. Sumit Agarwal & Vyacheslav Mikhed & Barry Scholnick, 2016. "Does inequality cause financial distress? Evidence from lottery winners and neighboring bankruptcies," Working Papers 16-4, Federal Reserve Bank of Philadelphia.
    14. Nguyen, Cuong Viet & Tran, Anh Ngoc, 2021. "The Long-Term Effect of FIFA World Cup on Gender Gap in Education and Employment: Evidence from Vietnam," GLO Discussion Paper Series 893, Global Labor Organization (GLO).
    15. Hsuan-Hua Huang & Hsing-Wen Han & Kuang-Ta Lo & Tzu-Ting Yang, 2023. "Liquidity Constraints, Cash Windfalls, and Entrepreneurship: Evidence from Administrative Data on Lottery Winners," Papers 2303.17029, arXiv.org.
    16. Cuong Nguyen & Anh Tran, 2020. "Are children an incentive or a disincentive for migration? Evidence from Vietnam," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 28(3), pages 467-485, July.
    17. Yung-Yu Tsai & Hsing-Wen Han & Kuang-Ta Lo & Tzu-Ting Yang, 2022. "The Effect of Financial Resources on Fertility: Evidence from Administrative Data on Lottery Winners," Papers 2212.06223, arXiv.org, revised Dec 2023.
    18. Masakure, Oliver, 2016. "The effect of employee loyalty on wages," Journal of Economic Psychology, Elsevier, vol. 56(C), pages 274-298.
    19. Bui, Anh Tuan & Nguyen, Cuong Viet & Pham, Thu Phuong, 2019. "Impact of foreign investment on household welfare: Evidence from Vietnam," Journal of Asian Economics, Elsevier, vol. 64(C), pages 1-1.
    20. Daniel Mont & Cuong Viet Nguyen & Anh Tran, 2020. "The Effect of Sibship Size on Children’s Outcomes: Evidence from Vietnam," Child Indicators Research, Springer;The International Society of Child Indicators (ISCI), vol. 13(1), pages 147-173, February.

    More about this item

    Keywords

    Friendship; Social connection; Income shocks; Lottery prizes;
    All these keywords.

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • D1 - Microeconomics - - Household Behavior
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:136:y:2021:i:c:s0014292121001008. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eer .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.