Xi Chen: The cost of keeping up with the Joneses in China

welcome to the Macmillan report I’m Marilyn wilshire host and our guest is she Chan an assistant professor at yale school of public health professor chance research interests involved health and development economics his work explores how social interactions affect health behavior and outcomes and how socioeconomic status drive social competition today we’ll talk with Professor Chen about how keeping up with the Joneses is contributing to poverty and health problems in China welcome professor Chen thank you very much is my pleasure to be here so let’s start with me I guess asking you how you came to study this topic is there anything in particular that led you to it to be perfectly honest is that this is a combination of luck and the past dependence so I was trained as agriculture economist and you know most of the people in this world are living in poverty and the so if you know the people are being poor then you know much of the economics that really matters and most of the poor people really rely on agriculture to earn their living so if you know the economics of Agriculture then you know much of the economics of being poor so that’s there was a opening remark by Theodore shoes in the nineteen seventy-nine Nobel Prize nectar and I think it’s known as truth today then he was like 30 more than 30 years ago so that’s a I’m lucky to be in the program in the agricultural economics program and because I’m I was enrolling the program i have many chance to go to the field to talk to farmers so many of the starters you mentioned just a few i came into my mind due to my field trip so for example you mentioned that i’m working on like health behavior especially the stigmatized behavior I was in the field in central part of China at that moment I survey the farmers and the talk to them ask them detail the consumption and the income and the suddenly I realized there’s a huge gap between the two so how could they spend so much but without a very tight and very large income so then the farmers was we’re shy they told me that they also engaging blood cells so that reminded me of all the literature I say about the broader market of stigmatized for example India there’s a large organ sale market and there there is a stigmatized market associated with this type of behavior so so that link my observation to the larger literature and the second delay you also mentioned like a gift spending festival spending so that’s also coming into my mind when I was in the coastal region in in the suburb of sháá out of Shanghai I I was on a bus and I met a migrant worker who told me that if three of his friends hold weddings in a single months then he will run out of the money so that’s a huge burden photo so I was not key to being a failed survey in western China another area then I the first day I was in the field I I ran into a wedding very luxury wedding went on in that region and i attended a wedding from that time on I realized how waste of all those consumptions could be okay let’s talk specifically about the research that you’ve done give us a brief overview of it you might research is actually and it’s at the intersection of basically three things a public health development and the house and the labor economics those three things are and I have a lot of interest in doing looking at how poor people they be cave differently from other other populations and how it affected their economic and we’re being and how it affected their their health so for example to highlight some of my research the first thing I’m interested in is to

look at how social interactions affected their behavior so in so that’s why the first the first the natural question coming to my mind is how the social network can evolve so i’m working with a PhD student at the you know economics department to look at more to develop a theoretical and empirical measures to better improve the previously previous estimation methods for for link formation so we have more flexible estimation and we introduce utility function people form link because they feel is better to form the not to form so we we introduce such utility function very classical economics utility function into the into the framework and also for the second area on this gift air and the spending escalation actually I’m link that to the large literature of which had the early development and especially in neutral people nowadays more and more realize that the first few months in utero is very important for the we’re being so we try to test how those predictions and have on for the children for a longer period into their labor market performance they are we’re being and the work we are doing are quite different unlike the natural disasters nuclear fallout those things i’m looking at a very basic and everyday experience so that i think that’s a very relevant to the most poor people so you are and what parts of china are you looking at basically my I’m recently looking at a western China but also looking more broadly to other countries okay so basically though it is generally the poor population in agricultural it is okay yes so these people are engaging in gift-giving as part of their culture and they are giving beyond their means that’s what you’re finding and that has a health effect on their children because they’re not getting the appropriate nutrition probably and our is there anything else contributing to that the health issues the part of a and one of the reasons of those type of food keeps giving and is in my research is due to the due to the changing demographics conditions how can exempt all the you can say say that nowadays because of the some preference and the one-child policy in China some other countries don’t have one child policy but they have some preference then it means a lot to the marriage market a lot of surplus sons were born than women so so that totally ship reshape the balance of the marriage market and the sons family need to through a very luxury weddings and investing cars housing stuff using their life savings to to to invest in those ceremonies so so in the field we actually find that the groom’s family they organize far more lavish weddings than gross families they don’t do much of that so that’s a demographic condition not changing the gift giving and the ceremony spending and the second C important is the inequality issue and in China the Gini coefficient is the official rate is passing point to 45 that’s a very inami important but according to some now official statistics like some service by universities they show that the GD coefficient is more than point six one so that’s really an army this means that when the people some group of people becoming rich mean like drive up the competition about for the for the poor guys and the in China you know maybe there is no much safety nets and the same consumption by the poor and the rich can mean different totally different things so they want to catch up but they have very scarce resources so my while my papers was referenced in the Economist magazine they the in the magazine we first talked about how the rich people they they like seeking status and they like by luxury goods in Paris but then the in the second apart they talked about the motives not restricted to the rich people actually for the poor they have more incentive to climb social headers

so that’s the second thing the servicing is very concrete is about remittance in in 2004 China has passed the very famous Louis turning point that means that the laborers are becoming very skills and which read have driven up if we look at the gift data we collected and also the also the wage increasing rate you put these two figures together you will say that they match very well so that means and and in our rigorous analysis we also find the remittance also drive up this price and a lot of people young people the young generation they migrate out and they send the remittances in cash and in-kind to their parents and the parents may spend the different way they treat this type of income a swingable income so they they are easy come easy go so so they disproportionately spent on ceremonies and we also find that for families without those type of window in common remittances this deal there is a spillover effect to those families if they are in the network of families with large remittances so these three things I think the main factors that driven the escalation uppercuts okay so I mean is there any end in sight I mean how much will this how much can this possibly progress to it seems already that it’s out of control so what do you think is going to happen oh I think you in the near future you can say more and more such as spending because the overall income growth rate is very high so you still say a lot of resources being put into this activities but gradually I think people were job a job at home from and they may feel reluctant to be dropping out of this like a gift and step ceremony spending but on the other hand there are some like social security program going on that also like reduce such reliance on the informal social networks social spending gifts for example the recent the recent implementation of the old-age pension in China in rural area which cover most of people and our study now show some initial results showing that people are becoming less reliant on the on the gift spending as the informal way informal way to insure against the future risks the reason is that they with more pension income they become more economically independent not only independent from their adult children but also from the community where they live okay so so the gift-giving what is the purpose of the gift-giving to get them some secure status in society the giving and there are many like motives for example people give gift just one to insure against the future risk for example they realize in the future they want to hold ceremonies they want to other people to contribute right so the freedom of the cost let’s okay so you give to other so then down the road when you need to have something that they’ll give to you for your yes that’s basically not changing this thousands of years that’s a very basic form of mutual insurance okay what’s really worrisome is about to the escalating part right which is not explained by this cartoon all the social norm is not changing it evolves very slowly but some sudden change from outside like the sex ratio since and and the remittance is like inequality just the happen in the wrist in the decades this can totally change the equilibrium that that make people to contribute to send more gifts I say okay let and let’s touch back again on the health concerns the in utero part explain that again to me how it’s affecting that particular situation oh this is a there’s a large literature on this hypothesis called back her hypothesis or filter original hypothesis which shows that if there’s the external shocks to the in utero period this will last long into future like in the labor market into like

chronic diseases so and especially in the first trimester of the in utero so in our analysis we can separate the Sharks of social events like weddings funerals hosted by the fellow villagers in the in the village so not only not buy them their own household but by other people around and they show how it affect the people differently in different the true masters first semester second and the third semester and we look at some some very we’re used in the house indicators like high 24 h this height is a very useful indicator to indicate the long term and nutritional status and we also look at a weight which is as more immediate measures this and also we link our findings to the large literature unlike on diabetes obesity those issues because they all predict that a loss of weight or standing or wasting they can predict the long-term loss for example have higher chance to have diabetes in the in the early in their later life okay interesting okay so I again I just want to come back to you are arguing that the gift giving basically because they’re giving so much money in gifts that women are not eating enough during pregnancy and that’s affecting the children yes ok so how moving forward how do you improve upon that situation do you see any way to lessen that happening oh this is a good question so we need to like think about the policy implication how we can inter Wayne so the but it’s really hard but we can like firstly i think the researcher can suggest to the anti-poverty programs we have a lot of anti-poverty programs in the world and in South Asia in Africa but we still say that people like throwing lavish weddings funerals in Ghana in South Africa India they build empty house but no people live inside so they just want to show status in China gift giving is when impotency and the bride price and dollar in India is is very huge for those poor families so we need to think about whether the traditional or the conventional any poverty measure program is effective enough we for the conventional poverty program they only care about to lifting people out of poverty by measure of income but they’re not as spending much too much time on looking at how people spending those money so how spending this money is really matters to their we’re being so so we so one thing I think we can like suggest this is to is to like start a the key players in those events now when for example when you have a network information you know who is the key player in those social network then if your targeted key player in those events then if we’re have a spillover effect to generate multiplier effect to the people around so that will become more efficient and even if for some data I know it’s quite costly to collect a social social network interaction measures but you still know that in a community who is the more powerful guy who make decisions usually in my study I find that those people the the party leaders the the village leaders they they actually spend more on gifts and they are very popular to receive gifts from other people when they host the ceremonies so if you target those people without social network information aware piece still be proved to be very efficient and also we in the in the long run we we also need to think about what factors really like change the equilibrium not only this network things for example as I mentioned the inequality and also the demographic condition like more men the women in the labor market if we don’t fundamentally changing this this factors then we were still say those gifts of spendings squeeze out the basically consumption so we need to fundamentally changing the Democratic condition changing the way people spend their remittances and

changing the way people are money and reduce trip redistribute their wells then we can finally tackle this issue it seems like it will be a difficult issue to tackle especially because it seems to be so culturally ingrained and in society so because of that it seems like it’s a very difficult problem to overcome unfortunately but it sounds like you’re making some progress with it so that’s good okay well thank you for being here today and sharing some of your work thank you very much for more information about professor Chen and his research please visit our website at yale edu slash macmillan report be sure to join us again for another episode of the macmillan report made possible through funding from the Whitney and Betty Macmillan Center for International and area studies at Yale