| It has been widely recognized that the poor spends a significant proportion of their income on social spending even at the expense of basic consumption. What are the motives behind the observed lavish social spending among the poor? We attempt to test three competing explanations at the social link level, risk pooling, peer effect, and status concern, via a uniform framework based on a unique primary dataset. The data set include household information from a three wave census type household survey as well as a long term gift record for all households in three villages in a poor region in rural China. Our dyadic estimations confirm the prevalence of peer influence and the status seeking motive in shaping gift spending and its rapid growth, while... |
