IDEAS home Printed from https://ideas.repec.org/p/fpr/ifprid/1615.html
   My bibliography  Save this paper

Forced gifts: The burden of being a friend

Author

Listed:
  • Bulte, Erwin
  • Wang, Ruixin
  • Zhang, Xiaobo

Abstract

In many developing countries, gift expenses account for a substantial share of total household expenditures. As incomes rise, gift expenses are escalating in several developing countries. We develop a theoretical model to demonstrate how (unequal) income growth may trigger “gift competition†and drive up the financial burden associated with gift exchange. We use unique census-type panel data from rural China to test our model predictions and demonstrate that (1) the value of gifts responds to the average gift in the community, (2) the escalation of gift giving may have adverse welfare implications (especially for the poor), and (3) escalating gift expenses crowd out expenditures on other consumption items.

Suggested Citation

  • Bulte, Erwin & Wang, Ruixin & Zhang, Xiaobo, 2017. "Forced gifts: The burden of being a friend," IFPRI discussion papers 1615, International Food Policy Research Institute (IFPRI).
    • Handle: RePEc:fpr:ifprid:1615
    as

    Download full text from publisher

    File URL: http://cdm15738.contentdm.oclc.org/utils/getfile/collection/p15738coll2/id/131096/filename/131307.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Chen, Xi & Kanbur, Ravi & Zhang, Xiaobo, 2011. "Peer effects, risk pooling, and status seeking: What explains gift spending escalation in rural China?," IFPRI discussion papers 1151, International Food Policy Research Institute (IFPRI).
    2. Amihai Glazer & Kai A. Konrad, 2008. "A Signaling Explanation for Charity," Springer Books, in: Roger D. Congleton & Kai A. Konrad & Arye L. Hillman (ed.), 40 Years of Research on Rent Seeking 2, pages 713-722, Springer.
    3. Fafchamps, Marcel & Shilpi, Forhad, 2008. "Subjective welfare, isolation, and relative consumption," Journal of Development Economics, Elsevier, vol. 86(1), pages 43-60, April.
    4. Baland, Jean-Marie & Somanathan, Rohini & Wahhaj, Zaki, 2013. "Repayment incentives and the distribution of gains from group lending," Journal of Development Economics, Elsevier, vol. 105(C), pages 131-139.
    5. Jean Tirole & Roland Bénabou, 2006. "Incentives and Prosocial Behavior," American Economic Review, American Economic Association, vol. 96(5), pages 1652-1678, December.
    6. Betsey Stevenson & Justin Wolfers, 2008. "Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 1-102.
    7. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
    8. Ed Hopkins & Tatiana Kornienko, 2004. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," American Economic Review, American Economic Association, vol. 94(4), pages 1085-1107, September.
    9. Ellingsen, Tore & Johannesson, Magnus, 2011. "Conspicuous generosity," Journal of Public Economics, Elsevier, vol. 95(9), pages 1131-1143.
    10. Ulrike Malmendier & Vera L. te Velde & Roberto A. Weber, 2014. "Rethinking Reciprocity," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 849-874, August.
    11. Prendergast, Canice & Stole, Lars, 2001. "The non-monetary nature of gifts," European Economic Review, Elsevier, vol. 45(10), pages 1793-1810, December.
    12. Postlewaite, Andrew, 1998. "The social basis of interdependent preferences," European Economic Review, Elsevier, vol. 42(3-5), pages 779-800, May.
    13. Chen, Xi & Zhang, Xiaobo, 2012. "Costly posturing: relative status, ceremonies and early child development in China:," IFPRI discussion papers 1206, International Food Policy Research Institute (IFPRI).
    14. Carmichael, H Lorne & MacLeod, W Bentley, 1997. "Gift Giving and the Evolution of Cooperation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 485-509, August.
    15. 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).
    16. James Andreoni & B. Douglas Bernheim, 2009. "Social Image and the 50-50 Norm: A Theoretical and Experimental Analysis of Audience Effects," Econometrica, Econometric Society, vol. 77(5), pages 1607-1636, September.
    17. Tore Ellingsen & Magnus Johannesson, 2008. "Pride and Prejudice: The Human Side of Incentive Theory," American Economic Review, American Economic Association, vol. 98(3), pages 990-1008, June.
    18. 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.
    19. Marcle Fafchamps, 1999. "Risk sharing and quasi-credit," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 8(3), pages 257-278.
    20. Chen, Xi & Zhang, Xiaobo, 2012. "Costly posturing: relative status, ceremonies and early child development in China:," IFPRI discussion papers 1206, International Food Policy Research Institute (IFPRI).
    21. David K. Levine, 1998. "Modeling Altruism and Spitefulness in Experiment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(3), pages 593-622, July.
    22. repec:dau:papers:123456789/7079 is not listed on IDEAS
    23. Julia Vaillant & Michael Grimm & Jann Lay & François Roubaud, 2014. "Informal sector dynamics in times of fragile growth: The case of Madagascar," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 26(4), pages 437-455, September.
    24. KNIGHT, John & SONG, Lina & GUNATILAKA, Ramani, 2009. "Subjective well-being and its determinants in rural China," China Economic Review, Elsevier, vol. 20(4), pages 635-649, December.
    25. Pierre‐André Chiappori & Krislert Samphantharak & Sam Schulhofer‐Wohl & Robert M. Townsend, 2014. "Heterogeneity and risk sharing in village economies," Quantitative Economics, Econometric Society, vol. 5, pages 1-27, March.
    26. Xi Chen & David E. Sahn, 2018. "Social Interactions and Stigmatized Behavior: “Donating†Blood Plasma in Rural China," Working Papers id:12709, eSocialSciences.
    27. Ed Hopkins Jr., 2014. "Competitive Altruism, Mentalizing, and Signaling," American Economic Journal: Microeconomics, American Economic Association, vol. 6(4), pages 272-292, November.
    28. Waldfogel, Joel, 1993. "The Deadweight Loss of Christmas," American Economic Review, American Economic Association, vol. 83(5), pages 1328-1336, December.
    29. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-1458, December.
    30. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-477, June.
    31. John Knight & Ramani Gunatilaka, 2010. "The Rural-Urban Divide in China: Income but Not Happiness?," Journal of Development Studies, Taylor & Francis Journals, vol. 46(3), pages 506-534.
    32. Wang, Ruixin, 2016. "Who Should I Share Risk with? Gifts can tell : Theory and Evidence from Rural China," Discussion Paper 2016-003, Tilburg University, Center for Economic Research.
    33. Di Falco, Salvatore & Bulte, Erwin, 2013. "The Impact of Kinship Networks on the Adoption of Risk-Mitigating Strategies in Ethiopia," World Development, Elsevier, vol. 43(C), pages 100-110.
    34. Eiji Mangyo & Albert Park, 2011. "Relative Deprivation and Health: Which Reference Groups Matter?," Journal of Human Resources, University of Wisconsin Press, vol. 46(3), pages 459-481.
    35. Hwang, Hae-shin & Reed, W Robert & Hubbard, Carlton, 1992. "Compensating Wage Differentials and Unobserved Productivity," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 835-858, August.
    36. Wang, Ruixin, 2016. "Who Should I Share Risk with? Gifts can tell : Theory and Evidence from Rural China," Other publications TiSEM 95c6dbed-3f49-4d5a-987e-2, Tilburg University, School of Economics and Management.
    37. repec:unu:wpaper:wp2012-70 is not listed on IDEAS
    38. Chen, Xi & Sahn, David E. & Zhang, Xiaobo, 2018. "Social Interactions and Stigmatized Behavior: "Donating" Blood Plasma in Rural China," IZA Discussion Papers 11413, Institute of Labor Economics (IZA).
    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. Yongmin Luo & Shenqi Ding & Qiyuan Li & Min Gao, 2024. "Adding insult to injury: Living in a remote location increases the burden of gift expenses among the rural poor in China," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(5), pages 2229-2251, July.
    2. Mingzhi Hu & Guocheng Xiang & Shihu Zhong, 2021. "The Burden of Social Connectedness: Do Escalating Gift Expenditures Make You Happy?," Journal of Happiness Studies, Springer, vol. 22(8), pages 3479-3497, December.
    3. 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).
    4. Yi-Bin Chiu & Zhen Wang & Xu Ye, 2023. "Household gift-giving consumption and subjective well-being: evidence from rural China," Review of Economics of the Household, Springer, vol. 21(4), pages 1453-1472, December.

    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. Mingzhi Hu & Guocheng Xiang & Shihu Zhong, 2021. "The Burden of Social Connectedness: Do Escalating Gift Expenditures Make You Happy?," Journal of Happiness Studies, Springer, vol. 22(8), pages 3479-3497, December.
    2. Bracha, Anat & Vesterlund, Lise, 2017. "Mixed signals: Charity reporting when donations signal generosity and income," Games and Economic Behavior, Elsevier, vol. 104(C), pages 24-42.
    3. Chen, Xi, 2013. "Relative Deprivation in China," MPRA Paper 48582, University Library of Munich, Germany.
    4. Mirco Tonin & Michael Vlassopoulos, 2014. "An experimental investigation of intrinsic motivations for giving," Theory and Decision, Springer, vol. 76(1), pages 47-67, January.
    5. Adriani, Fabrizio & Sonderegger, Silvia, 2019. "A theory of esteem based peer pressure," Games and Economic Behavior, Elsevier, vol. 115(C), pages 314-335.
    6. Xi Chen & Xiaobo Zhang, 2012. "Costly Posturing: Relative Status, Ceremonies and Early Child Development in China," WIDER Working Paper Series wp-2012-070, World Institute for Development Economic Research (UNU-WIDER).
    7. Tonin, Mirco & Vlassopoulos, Michael, 2013. "Experimental evidence of self-image concerns as motivation for giving," Journal of Economic Behavior & Organization, Elsevier, vol. 90(C), pages 19-27.
    8. Benabou, Roland & Jaroszewicz, Ania & Loewenstein, George, 2022. "It Hurts to Ask," IZA Discussion Papers 15576, Institute of Labor Economics (IZA).
    9. Russell Golman, 2016. "Good manners: signaling social preferences," Theory and Decision, Springer, vol. 81(1), pages 73-88, June.
    10. Chen, Xi & Zhang, Xiaobo, 2017. "Costly Posturing: Ceremonies and Early Child Development in China," IZA Discussion Papers 10662, Institute of Labor Economics (IZA).
    11. repec:spo:wpmain:info:hdl:2441/5ulf84sluc9vlb5mrjr32mfetg is not listed on IDEAS
    12. Yongmin Luo & Shenqi Ding & Qiyuan Li & Min Gao, 2024. "Adding insult to injury: Living in a remote location increases the burden of gift expenses among the rural poor in China," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(5), pages 2229-2251, July.
    13. repec:hal:spmain:info:hdl:2441/5ulf84sluc9vlb5mrjr32mfetg is not listed on IDEAS
    14. Chen, Xi, 2015. "Status Concern and Relative Deprivation in China: Measures, Empirical Evidence, and Economic and Policy Implications," IZA Discussion Papers 9519, Institute of Labor Economics (IZA).
    15. Chen, Xi & Zhang, Xiaobo, 2012. "Costly posturing: relative status, ceremonies and early child development in China:," IFPRI discussion papers 1206, International Food Policy Research Institute (IFPRI).
    16. Yann Algan & Yochai Benkler & Mayo Fuster Morell & Jérôme Hergueux, 2013. "Cooperation in Peer-Production Economy: Experimental Evidence from Wikipedia," SciencePo Working papers Main hal-03460797, HAL.
    17. Yann Algan & Yochai Benkler & Mayo Fuster Morell & Jerome Hergueux, 2013. "Cooperation in Peer-Production Economy: Experimental Evidence from Wikipedia," Sciences Po publications info:hdl:2441/5ulf84sluc9, Sciences Po.
    18. Luca Zarri, 2013. "Altruism," Chapters, in: Luigino Bruni & Stefano Zamagni (ed.), Handbook on the Economics of Reciprocity and Social Enterprise, chapter 1, pages 9-19, Edward Elgar Publishing.
    19. repec:unu:wpaper:wp2012-70 is not listed on IDEAS
    20. Casarico, Alessandra & Tonin, Mirco, 2021. "A field experiment on fundraising to support independent information," Journal of Economic Behavior & Organization, Elsevier, vol. 186(C), pages 227-250.
    21. Carattini, Stefano & Gillingham, Kenneth & Meng, Xiangyu & Yoeli, Erez, 2024. "Peer-to-peer solar and social rewards: Evidence from a field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 219(C), pages 340-370.
    22. Anya Savikhin & Roman Sheremeta, 2010. "Visibility of Contributions and Cost of Information: An Experiment on Public Goods," Working Papers 10-22, Chapman University, Economic Science Institute.
    23. Andrew E. Clark & Claudia Senik, 2010. "Will GDP growth increase happiness in developing countries?," PSE Working Papers halshs-00564985, HAL.

    More about this item

    Keywords

    CHINA; EAST ASIA; ASIA; household expenditure; developing countries; income; rural communities; welfare; gift competition; reciprocity; subjective well-being; inequality; O10 Economic Development: General; I30 Welfare; Well-Being; and Poverty: General; D10 Household Behavior: General;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • D1 - Microeconomics - - Household Behavior

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:fpr:ifprid:1615. 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: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/ifprius.html .

    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.