On the Fungibility of Spending and Earnings : Evidence from Rural China and Tanzania
A common behavioral assumption of micro-economic theory is that income is fungible. Using household panel data from rural China and Tanzania, this study finds however that people are more likely to spend unearned income on less basic consumption go...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2012/12/17123932/fungibility-spending-earnings-evidence-rural-china-tanzania http://hdl.handle.net/10986/12208 |
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okr-10986-122082021-04-23T14:03:05Z On the Fungibility of Spending and Earnings : Evidence from Rural China and Tanzania Christiaensen, Luc Pan, Lei ACCOUNTING AGRICULTURAL COMMODITIES AGRICULTURE AID EFFECTIVENESS ATTRITION AVERAGE INCOME BARGAINING BORROWING BUDGET CONSTRAINTS CASH TRANSFERS CONSUMER CHOICE CONSUMERS CONSUMPTION BEHAVIOR CONSUMPTION FUNCTION CONSUMPTION SMOOTHING COPING BEHAVIORS COUPONS CRISES CROP INCOME CROSS-SECTION DATA DEBT DECISION MAKING DEPENDENT VARIABLE DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DROUGHT EARNED INCOME EARNINGS ECONOMIC CONDITIONS ECONOMIC DEVELOPMENT ECONOMIC REVIEW ECONOMIC SHOCKS ECONOMIC THEORY EMPIRICAL APPLICATION EMPIRICAL FINDINGS EMPLOYMENT EMPLOYMENT GUARANTEE SCHEMES EXPLANATORY POWER FARM ACTIVITIES FARM INCOME FEMALE LABOR FINANCIAL SECTOR FOOD CONSUMPTION FOOD EXPENDITURES FUNGIBILITY GAME THEORY GIFT GIVING HOUSEHOLD BUDGET HOUSEHOLD CONSUMPTION HOUSEHOLD HEAD HOUSEHOLD HEAD AGE HOUSEHOLD INCOME HOUSEHOLD MEMBERS HOUSEHOLD SIZE HOUSEHOLD VULNERABILITY INCOME INCOME DATA INCOME GAINS INCOME GROUPS INCOME LEVELS INCOME SHARE INCOME SOURCE INCOME SOURCES INCOME TRANSFERS INCOMES INSURANCE LABOUR LIQUIDITY LOW INCOME MARGINAL PROPENSITY TO CONSUME MEASUREMENT ERROR NONFARM INCOME NUTRITION OPTIMIZATION PERMANENT INCOME PERMANENT INCOME HYPOTHESIS POLICY DISCUSSIONS POLICY IMPLICATIONS POLICY INTERVENTIONS POLICY RESEARCH POLITICAL ECONOMY POOR POST KEYNESIAN ECONOMICS POVERTY ANALYSIS POVERTY REDUCTION POVERTY REDUCTION PROJECT PUBLIC ECONOMICS PUBLIC POLICY RECIPROCITY REGRESSION TECHNIQUES RELATIVE PRICES RESOURCE ALLOCATION RURAL RURAL HOUSEHOLDS RURAL INFRASTRUCTURE RURAL SETTINGS SAFETY NETS SAVINGS SCHOOL FEEDING SIGNIFICANCE LEVEL SOCIAL SAFETY SOCIAL SAFETY NETS SOCIAL SECURITY SOCIAL SECURITY PROGRAMS TARGETING TAXATION UTILITY FUNCTION WEALTH A common behavioral assumption of micro-economic theory is that income is fungible. Using household panel data from rural China and Tanzania, this study finds however that people are more likely to spend unearned income on less basic consumption goods such as alcohol and tobacco, non-staple food, transportation and communication, and clothing, while they are somewhat more likely to spend earned income on basic consumption goods such as staple food, and invest it in education. This resonates with the widespread cultural notion that money that is easily earned is also more easily spent. Cognitively, the results could be understood within the context of emotional accounting, whereby people classify income based on the emotions it evokes, prompting them to spend hard earned money more wisely to mitigate the negative connotations associated with its acquisition. The policy implications are real, bearing for example on the choice between employment guarantee schemes and cash transfers in designing social security programs. 2013-01-29T18:26:14Z 2013-01-29T18:26:14Z 2012-12 http://documents.worldbank.org/curated/en/2012/12/17123932/fungibility-spending-earnings-evidence-rural-china-tanzania http://hdl.handle.net/10986/12208 English en_US Policy Research Working Paper; No. 6298 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Africa East Asia and Pacific |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ACCOUNTING AGRICULTURAL COMMODITIES AGRICULTURE AID EFFECTIVENESS ATTRITION AVERAGE INCOME BARGAINING BORROWING BUDGET CONSTRAINTS CASH TRANSFERS CONSUMER CHOICE CONSUMERS CONSUMPTION BEHAVIOR CONSUMPTION FUNCTION CONSUMPTION SMOOTHING COPING BEHAVIORS COUPONS CRISES CROP INCOME CROSS-SECTION DATA DEBT DECISION MAKING DEPENDENT VARIABLE DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DROUGHT EARNED INCOME EARNINGS ECONOMIC CONDITIONS ECONOMIC DEVELOPMENT ECONOMIC REVIEW ECONOMIC SHOCKS ECONOMIC THEORY EMPIRICAL APPLICATION EMPIRICAL FINDINGS EMPLOYMENT EMPLOYMENT GUARANTEE SCHEMES EXPLANATORY POWER FARM ACTIVITIES FARM INCOME FEMALE LABOR FINANCIAL SECTOR FOOD CONSUMPTION FOOD EXPENDITURES FUNGIBILITY GAME THEORY GIFT GIVING HOUSEHOLD BUDGET HOUSEHOLD CONSUMPTION HOUSEHOLD HEAD HOUSEHOLD HEAD AGE HOUSEHOLD INCOME HOUSEHOLD MEMBERS HOUSEHOLD SIZE HOUSEHOLD VULNERABILITY INCOME INCOME DATA INCOME GAINS INCOME GROUPS INCOME LEVELS INCOME SHARE INCOME SOURCE INCOME SOURCES INCOME TRANSFERS INCOMES INSURANCE LABOUR LIQUIDITY LOW INCOME MARGINAL PROPENSITY TO CONSUME MEASUREMENT ERROR NONFARM INCOME NUTRITION OPTIMIZATION PERMANENT INCOME PERMANENT INCOME HYPOTHESIS POLICY DISCUSSIONS POLICY IMPLICATIONS POLICY INTERVENTIONS POLICY RESEARCH POLITICAL ECONOMY POOR POST KEYNESIAN ECONOMICS POVERTY ANALYSIS POVERTY REDUCTION POVERTY REDUCTION PROJECT PUBLIC ECONOMICS PUBLIC POLICY RECIPROCITY REGRESSION TECHNIQUES RELATIVE PRICES RESOURCE ALLOCATION RURAL RURAL HOUSEHOLDS RURAL INFRASTRUCTURE RURAL SETTINGS SAFETY NETS SAVINGS SCHOOL FEEDING SIGNIFICANCE LEVEL SOCIAL SAFETY SOCIAL SAFETY NETS SOCIAL SECURITY SOCIAL SECURITY PROGRAMS TARGETING TAXATION UTILITY FUNCTION WEALTH |
| spellingShingle |
ACCOUNTING AGRICULTURAL COMMODITIES AGRICULTURE AID EFFECTIVENESS ATTRITION AVERAGE INCOME BARGAINING BORROWING BUDGET CONSTRAINTS CASH TRANSFERS CONSUMER CHOICE CONSUMERS CONSUMPTION BEHAVIOR CONSUMPTION FUNCTION CONSUMPTION SMOOTHING COPING BEHAVIORS COUPONS CRISES CROP INCOME CROSS-SECTION DATA DEBT DECISION MAKING DEPENDENT VARIABLE DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DROUGHT EARNED INCOME EARNINGS ECONOMIC CONDITIONS ECONOMIC DEVELOPMENT ECONOMIC REVIEW ECONOMIC SHOCKS ECONOMIC THEORY EMPIRICAL APPLICATION EMPIRICAL FINDINGS EMPLOYMENT EMPLOYMENT GUARANTEE SCHEMES EXPLANATORY POWER FARM ACTIVITIES FARM INCOME FEMALE LABOR FINANCIAL SECTOR FOOD CONSUMPTION FOOD EXPENDITURES FUNGIBILITY GAME THEORY GIFT GIVING HOUSEHOLD BUDGET HOUSEHOLD CONSUMPTION HOUSEHOLD HEAD HOUSEHOLD HEAD AGE HOUSEHOLD INCOME HOUSEHOLD MEMBERS HOUSEHOLD SIZE HOUSEHOLD VULNERABILITY INCOME INCOME DATA INCOME GAINS INCOME GROUPS INCOME LEVELS INCOME SHARE INCOME SOURCE INCOME SOURCES INCOME TRANSFERS INCOMES INSURANCE LABOUR LIQUIDITY LOW INCOME MARGINAL PROPENSITY TO CONSUME MEASUREMENT ERROR NONFARM INCOME NUTRITION OPTIMIZATION PERMANENT INCOME PERMANENT INCOME HYPOTHESIS POLICY DISCUSSIONS POLICY IMPLICATIONS POLICY INTERVENTIONS POLICY RESEARCH POLITICAL ECONOMY POOR POST KEYNESIAN ECONOMICS POVERTY ANALYSIS POVERTY REDUCTION POVERTY REDUCTION PROJECT PUBLIC ECONOMICS PUBLIC POLICY RECIPROCITY REGRESSION TECHNIQUES RELATIVE PRICES RESOURCE ALLOCATION RURAL RURAL HOUSEHOLDS RURAL INFRASTRUCTURE RURAL SETTINGS SAFETY NETS SAVINGS SCHOOL FEEDING SIGNIFICANCE LEVEL SOCIAL SAFETY SOCIAL SAFETY NETS SOCIAL SECURITY SOCIAL SECURITY PROGRAMS TARGETING TAXATION UTILITY FUNCTION WEALTH Christiaensen, Luc Pan, Lei On the Fungibility of Spending and Earnings : Evidence from Rural China and Tanzania |
| geographic_facet |
Africa East Asia and Pacific |
| relation |
Policy Research Working Paper; No. 6298 |
| description |
A common behavioral assumption of
micro-economic theory is that income is fungible. Using
household panel data from rural China and Tanzania, this
study finds however that people are more likely to spend
unearned income on less basic consumption goods such as
alcohol and tobacco, non-staple food, transportation and
communication, and clothing, while they are somewhat more
likely to spend earned income on basic consumption goods
such as staple food, and invest it in education. This
resonates with the widespread cultural notion that money
that is easily earned is also more easily spent.
Cognitively, the results could be understood within the
context of emotional accounting, whereby people classify
income based on the emotions it evokes, prompting them to
spend hard earned money more wisely to mitigate the negative
connotations associated with its acquisition. The policy
implications are real, bearing for example on the choice
between employment guarantee schemes and cash transfers in
designing social security programs. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Christiaensen, Luc Pan, Lei |
| author_facet |
Christiaensen, Luc Pan, Lei |
| author_sort |
Christiaensen, Luc |
| title |
On the Fungibility of Spending and Earnings : Evidence from Rural China and Tanzania |
| title_short |
On the Fungibility of Spending and Earnings : Evidence from Rural China and Tanzania |
| title_full |
On the Fungibility of Spending and Earnings : Evidence from Rural China and Tanzania |
| title_fullStr |
On the Fungibility of Spending and Earnings : Evidence from Rural China and Tanzania |
| title_full_unstemmed |
On the Fungibility of Spending and Earnings : Evidence from Rural China and Tanzania |
| title_sort |
on the fungibility of spending and earnings : evidence from rural china and tanzania |
| publisher |
World Bank, Washington, DC |
| publishDate |
2013 |
| url |
http://documents.worldbank.org/curated/en/2012/12/17123932/fungibility-spending-earnings-evidence-rural-china-tanzania http://hdl.handle.net/10986/12208 |
| _version_ |
1764422227989626880 |