Thy Neighbor’s Misfortune: Peer Effect on Consumption

Thy Neighbor’s Misfortune: Peer Effect on Consumption

Using a large, representative sample of credit and debit card transactions in Singapore, this paper studies the consumption response of individuals whose same- building neighbors experienced personal bankruptcy. The unique bankruptcy rules in Singapore suggest liquidity shocks drive personal bankrup...

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Veröffentlicht in:American economic journal. Economic policy 2021-05, Vol.13 (2), p.1-25
Hauptverfasser: Agarwal, Sumit, Qian, Wenlan, Zou, Xin
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creator Agarwal, Sumit
Qian, Wenlan
Zou, Xin
description Using a large, representative sample of credit and debit card transactions in Singapore, this paper studies the consumption response of individuals whose same- building neighbors experienced personal bankruptcy. The unique bankruptcy rules in Singapore suggest liquidity shocks drive personal bankruptcy decisions, leading to a substantial drop in consumption for the bankrupt. Peers’ monthly card consumption decreases by 3.4 percent over the 1- year postbankruptcy period. There exists no consumption decrease among individuals in immediately adjacent buildings nor for consumers with diminished postevent social ties with the bankrupt. The findings imply a significant social multiplier effect of 2.8 times the original consumption shock.
doi_str_mv 10.1257/pol.20170634
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title Thy Neighbor’s Misfortune: Peer Effect on Consumption
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