The effect of social pressure on expenditures in Malawi

- I study the effect of redistributive pressure on the timing of expenditures in rural Malawi.
- Spending money quickly may be a strategy for reducing obligatory transfers.
- Recipients anticipate spending more quickly when they receive payments in the presence of peers.

I vary the observability of windfall payments to 291 members of agricultural clubs in rural Malawi in order to study the effect of redistributive pressure on the timing of expenditures. While other studies have documented that social pressure affects the quantity of income and consumption, I focus on timing because spending money quickly may be a strategy for reducing obligatory transfers. Respondents who receive money in the presence of their agricultural club anticipate spending an extra 14 percent (0.28 standard deviations) in the week immediately following the payment than those who receive equivalent transfers in private settings. There are limited changes in the composition of spending, but some evidence that social pressure to share windfall income has a larger effect on poorer households.