Consumption peer effects among migrants in China

Using a representative sample of Chinese migrants, this paper investigates whether Chinese migrants' consumption is sensitive to the consumption of their peers in the destination area. By exploiting the plausible exogenous variation from peers' health shocks and the rate of first-born boys in the peer group as two instrumental variables, we find that the peer effect on migrants' consumption is positive and significant. The peer effect is stronger among migrants with lower socioeconomic status. The results are robust to a battery of checks. In addition, we confirm that social networks are essential for this peer effect, and we show that social learning and risk-sharing mechanisms play an important role in generating peer effects. Results from social learning channel also show that migrants with more sense of belonging in the destination learn more in consumption from the high-spending peers and learn less from the low-spending peers. Our study stresses the multiplier effect of stimulus policies for migrants’ consumption.