Celebrations as Social Investments: Festival Expenditures, Unit Price Variation and Social Status in Rural India

Abstract

Festival expenditures amount to over 15 per cent of a household's annual expenditures in rural India. Yet they have never been studied by economists. This article uses both qualitative and quantitative data from a case study of three South Indian villages to show that festivals are important public goods in the village, but neither a pure entertainment motive nor an altruistic desire to contribute to a public event seems to explain their size. Households which spend money on festivals, everything else held equal, are able, however, to generate tangible rewards - lower prices on food, higher social status and more invitations to meals from other families. This indicates that active participation in festivals generates private economic and social returns which help resolve a potential free-rider problem. The evidence is consistent with the notion that festivals serve as mechanisms by which communities build social networks.