Anatomy of Stigmatized Behavior: Peer Influence and Relative Concern

Despite the resultant disutility, some people, in particular the poor, are still engaged in behavior carrying social stigma, such as selling organs and sex. Empirical economic studies on stigmatized behavior are largely absent due to lack of data. In this paper, merging a unique long-term gift exchange record with a census-type panel survey over three waves in rural China, we examine blood sales (or more correctly, “donations with nutrition subsidy”), a widely regarded stigma behavior in the Chinese society. Three identification strategies are applied to identify peer influence, namely conventional IV method, centrality-based reweighting and spatial instruments strategy. Results show that a 100% rise in peers’ engagement in blood sales increases one’s sales probability by 12%-21%, sales value by 9%-12%, and a second household member selling blood by 9%-16%. The results are robust to adding heterogeneous intensities of social ties and definitions of reference groups. Moreover, concern for status plays an important role in shaping stigma behavior, especially when the consequence of falling behind is grave. For example, families with unmarried son are more likely to sale blood as they need to build bigger houses, bid up bride price, and throw larger wedding banquet in order to improve their sons’ likelihood of marriage in the increasingly tightening marriage market. However, status concern is not captured by the conventional community-specific inequality measures. Our results call for a big caution using the well-accepted Gini index in predicting social behavior, and special attention should be given to the negative externality originated from peers’ stigmatized behavior.