CHILDREN AND THE ECONOMICS OF CHRISTMAS GIFT-GIVING

In spite of its importance to the retail sector, there has been relati vely little research on the economics of Christmas Season gift-giving. The one exception is Waldfogel (1993), The Deadweight loss of Christm as, American Economic Review, 83, 1328-1336, who found a substantial a mount of deadweight loss associated with Christmas gift-giving. Here i t is shown that the Waldfogel study is incomplete and alternative mode ls of consumer choice theory which better explain Christmas gift-givin g are identified. Although the standard neoclassical and altruistic mo dels predict no relationship between the population of children and pe r capita Christmas spending, a model is developed that includes non-pe cuniary externalities and predicts that children have a positive impac t on Christmas gift-giving. This prediction is supported by empirical evidence.