Social Network, Gift Exchanging and Inequality in China

Abstract: Gift exchanging during ceremonies or visits is a well-known social norm in almost all Asian countries and has been well studied by anthropologists and sociologists. With a newly available national representative survey on Chinese families, we are the first to conduct quantitative analysis on this phenomenon. In this paper, we first provide statistical descriptions of the size of gift exchanging and the direction of gifts etc. In only one survey year, 87% of families had more than one time of gift exchanging, and the average gift value (including both cash and in-kind) was as high as 2013.35 CNY, or 11.72% of that year’s China’s per capita income. Besides the surprisingly large amount of gift exchanging, the more striking fact is that on average the gifts are flowing from the poor to the rich as an informal regressive tax. We also empirically prove that more gifts expenditure is associated with benefits in terms of job seeking, school quality, hospital quality and loans etc., and we also estimate the inefficiency loss in human capital allocation and other scarce resources allocation due to this kind of benefits.