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Social Norms, Status Spending and Household Debt: Evidence from Kyrgyzstan

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  • Aldashev, Alisher

Abstract

Development economists have two key paradigms concerning poverty and financial markets. One considers the poor in the developing world as operating in imperfect markets. Another view is that the poor are subject to constraints. The policy prescriptions stemming from these views would be improving market access and redistribution. We consider one important constraint the poor are facing: social norms which require spending on ceremonial activities. This paper adds to the literature by providing empirical evidence that having access to loans makes households spend more on ceremonies and with the higher ceremonial spending they increase the likelihood of debt thus creating a vicious circle which might keep households in poverty. Thus policies which are aimed at either removing market frictions or providing benefits to the poor will not have a desired effect. These measures have to be combined with reforms aimed at changing the existing institutions.

Suggested Citation

  • Aldashev, Alisher, 2019. "Social Norms, Status Spending and Household Debt: Evidence from Kyrgyzstan," MPRA Paper 91363, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:91363
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    References listed on IDEAS

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    Cited by:

    1. Kimsanova, Barchynai & Herzfeld, Thomas, 2022. "Policy analysis with Melitz-type gravity model: Evidence from Kyrgyzstan," Journal of Asian Economics, Elsevier, vol. 80(C).
    2. Li, Qing & Yu, Shuai & Échevin, Damien & Fan, Min, 2022. "Is poverty predictable with machine learning? A study of DHS data from Kyrgyzstan," Socio-Economic Planning Sciences, Elsevier, vol. 81(C).

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    More about this item

    Keywords

    Ceremonial spending; conspicuous consumption; debt; poverty trap; Kyrgyzstan; instrumental variable;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • I39 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Other
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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