Academic journal article Economic Inquiry

Marriage Market Matching and Conspicuous Consumption in China

Academic journal article Economic Inquiry

Marriage Market Matching and Conspicuous Consumption in China

Article excerpt

I. INTRODUCTION

A preference for sons, coupled with the one child-policy, has combined to generate a relative shortage of females in China. Estimates from China's Population Census suggest that for cohorts bom over the period 1970-2000, males have grown in share from 51% to 57% of the total population (Qian 2008, 1251). Estimates of the share of "missing women" in the country now exceed 40 million women (Bulte et al. 2011). Existing research has shown that these skewed sex ratios are producing widespread social and economic upheaval, including higher saving rates, ballooning housing prices (Wei and Zhang 2011; Wei et al. 2012), higher rates of bachelorhood (Guilmoto 2012), and reduced overall welfare (Bhaskar 2011). Recent research also suggests that spending on status goods appears to be growing in magnitude, even in poorer parts of rural China (Brown et al. 2011; Chen et al. 2012).

In this article, we investigate the extent to which skewed sex ratios influence expenditure decisions in a broad sample of roughly 24,000 automobile transactions across China over the period 2009-2011. Using a differences-indifferences-in-differences approach, we show that unmarried male consumers who reside in an area with an unfavorable sex ratio purchase more expensive vehicles than their married peers. We also identify specific luxury vehicle models and confirm that the cars purchased by these consumers are more likely to be classified as higher end models.

The pressure generated by skewed sex ratios on individuals to consume conspicuously may vary along a number of dimensions. We are able to explore two sources of heterogeneity in our sample. First, we show that the estimated relationship is both larger in magnitude and more precisely estimated among the quartile of individuals living in areas with the most highly skewed sex ratios. Second, we find that the poorest quartile of unmarried males in our sample exhibit the largest changes in expenditure. (1) This result is consistent with a situation in which individuals of varying income (and potentially of varying reference groups) use different sets of commodities to signal wealth, as documented by Chai and Kaus (2012) for South African consumers. Finally, we investigate whether this behavior generates negative externalities in the form of lower average fuel economy and higher average vehicle weight, a factor that can significantly increase mortality in traffic accidents (Anderson and Auffhammer 2014). Our results suggest that consumption signaling skews the pool of purchased automobiles to lower gas mileage vehicles, but has little impact on overall vehicle weight.

The use of consumption expenditure to signal social status has attracted a great deal of attention in the economics literature. Recent work has focused on empirically identifying consumption visibility and exploring the determinants and motivations for signaling (Charles et al. 2009; Heffetz 2011). These efforts routinely classify automobiles as among the most conspicuous of purchases and a number of papers focus specifically on vehicle purchases. For instance, Grinblatt et al. (2008) show that Finnish consumers are directly influenced by the automobile purchases of their nearest neighbors, particularly for recent purchases.

Positional spending has also been studied in developing countries, with research highlighting the fact that the allocation of expenditure for this purpose has the potential to act as a poverty trap in this setting (Banerjee and Duflo 2007: Brown et al. 2011; Case et al. 2013; Kaus 2013; Moav and Neeman 2010, 2012). These effects appear to be amplified by marriage market conditions. For instance, Chen et al. (2012) show that relative to families with daughters, poor Chinese households with sons undertake higher levels of social gift-giving associated with maintaining guanxi, networks of influence in Chinese society.

Our analysis sample confers several unique advantages in this context. …

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