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Are individuals in China prone to money illusion?

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  • Mees, Heleen
  • Franses, Philip Hans

Abstract

We replicate the landmark study of Shafir, Diamond and Tversky (1997) to examine whether individuals in China are prone to money illusion. We find that money illusion is prevalent in China as well. Respondents in the Chinese sample are often somewhat more likely to base decisions on the real monetary value of economic transactions compared to respondents in the U.S. sample. If asked explicitly to evaluate a transaction in terms of happiness or satisfaction instead of economic terms, money illusion among respondents in the Chinese sample is comparable to money illusion among respondents in the U.S. sample.

Suggested Citation

  • Mees, Heleen & Franses, Philip Hans, 2014. "Are individuals in China prone to money illusion?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 51(C), pages 38-46.
    • Handle: RePEc:eee:soceco:v:51:y:2014:i:c:p:38-46
    DOI: 10.1016/j.socec.2014.03.003
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    Cited by:

    1. Darriet, Elisa & Guille, Marianne & Vergnaud, Jean-Christophe & Shimizu, Mariko, 2020. "Money illusion, financial literacy and numeracy: Experimental evidence," Journal of Economic Psychology, Elsevier, vol. 76(C).
    2. Thomas A. Stephens & Jean-Robert Tyran, 2016. "Money Illusion and Household Finance," Discussion Papers 16-14, University of Copenhagen. Department of Economics.
    3. Murota, Ryu-ichiro, 2019. "Negative interest rate policy in a permanent liquidity trap," MPRA Paper 93498, University Library of Munich, Germany.
    4. Lechthaler, Wolfgang & Mileva, Mariya, 2024. "Trade liberalization, wage inequality, and monetary policy," Journal of International Money and Finance, Elsevier, vol. 143(C).
    5. Ryu‐ichiro Murota, 2018. "Aggregate demand deficiency, labor unions, and long‐run stagnation," Metroeconomica, Wiley Blackwell, vol. 69(4), pages 868-888, November.

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    More about this item

    Keywords

    China; Behavioral economics; Money illusion;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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