Positional spending and status seeking in rural China
Brown,P. Bulte,E.H. Zhang,X.L.
Brown,P.
Bulte,E.H.
Zhang,X.L.
Abstract
Focusing on a remote area in rural China, we use a panel census of households in 26 villages to show that socially observable spending has risen sharply in recent years. We demonstrate that such spending by households is highly sensitive to social spending by other villagers. This suggests that social spending is either positional in nature (i.e., motivated by status concerns) or subject to herding behavior. We also document systematic relations between social spending and changes in higher order terms of the income distribution. We find that the implications of status seeking for spending are not unidimensional—they vary across income groups and expenditure categories. In particular, and consistent with theories of rank-based status seeking, we find that the poor increase spending on funerals and gifts as competition for status intensifies. In addition, poor families of grooms expend more for wedding ceremonies as local income competition increases, while the families of brides do not. The welfare implications of spending in order to "keep up with the Joneses" are potentially large, particularly for poor households.
Description
Date
2011
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
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Journal Issue
Keywords
SDG 1 - No Poverty, SDG 2 - Zero Hunger, SDG 10 - Reduced Inequalities
Citation
Brown, P, Bulte, E H & Zhang, X L 2011, 'Positional spending and status seeking in rural China', Journal of Development Economics, vol. 96, no. 1, pp. 139-149. < http://www.sciencedirect.com/science/article/pii/S0304387810000593 >
License
info:eu-repo/semantics/restrictedAccess