The Mystery of Spending on Celebrations:The Case of Kyrgyzstan

Sammanfattning: Luxury spending in connection with festivals has been evidenced as a puzzle in the context of developing countries, and the motivation behind this behavior is still not fully understood. This paper tests three main hypotheses: peer effect, status seeking and risk pooling, to account for the celebration spending of families in Kyrgyzstan using the Life in Kyrgyzstan (LiK) dataset. A first contribution of this paper is to provide statistics comparable at an international level for a country which does not receive much academic attention. I describe here the basic characteristics of families and their subjective evaluations regarding festival spending, both own and of neighbors. The main focus of the analysis is on the determinants of celebration spending between 2011 and 2013 using a panel regression framework. I find evidence that celebration spending is heavily influenced by peers within neighborhoods, while the effect of status seeking and risk pooling are relatively small. Furthermore I find support for a marriage-market investment hypothesis, however not related to unmarried children in the household, as previously identified in the literature. In my data, it is the experience of divorce that increases the level of celebration spending at both the family and the community level.