The Burden of Social Connectedness: Do Escalating Gift Expenditures Make You Happy?

Gift expenses escalated in China in the last decades with rapid economic growth and account for a substantial share of household expenditures. Rising gift expenses signal good friendships and facilitate reciprocity, which may enhance one’s subjective wellbeing. However, increasing gift giving may also exacerbate the financial burden of households and thus has adverse welfare implications. This study examines how escalating gift expenses impact individuals’ subjective happiness by using data from the China Family Panel Studies. Findings suggest that an increase in the ratio of gift expenses to household income can significantly decrease one’s subjective happiness by crowding out other consumption items and harming psychological health. Overall, this study offers new insights into informal social networks maintained by gift giving, which may adversely affect household welfare.