Working Paper #2016-060
On the fungibility of public and private transfers: A mental accounting approach
A common assumption in economics is that money is fungible. In other
words, spending patterns do not depend on the source of income, only on
the total amount. The mental accounting theory, however, rejects this
assumption by arguing that people compartmentalise their income into
different mental accounts and decide on their consumption within each of
these accounts. In this paper I hypothesise that households differently
associate a private transfer coming from a migrant than a public
transfer received from the government, and that this impacts the way
transfers are spent. By analysing the first nationally representative
longitudinal survey in South Africa, covering the years 2008, 2010 and
2012, I find evidence that public and private transfers are not spent in
the same way.
- Keywords
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- Fungibility
- Mental Accounting
- Remittances
- Social transfers
- South Africa
- JEL codes
-
- D1
- D12
- F24
- J18
- I38
- E21
Cite this as
APA 7th ed.Waidler, J. (2016). On the fungibility of public and private transfers: A mental accounting approach (UNU-MERIT Working Paper No. 2016-060). UNU-MERIT. https://unu-merit.nl/publications/working-papers/abstract/?id=6136