Social Capital or Financial Burden? Ritual Gift Expenditure and Income Growth in Rural China

ABSTRACT In rural China, ritual gift expenditure is often viewed as expressive consumption, a ritual obligation, or a financial burden embedded in renqing relations. Its possible role as social‐capital investment, however, remains less understood. Using an unbalanced panel from the 2016, 2018, 2020, and 2022 waves of the China Family Panel Studies, this paper examines the association between ritual gift expenditure and rural household income. We estimate household and year fixed‐effects models and use mechanism tests to explore possible pathways. The results show a statistically significant positive association. This association remains robust to alternative variable definitions, sample adjustments, and supplementary analyses that partially address endogeneity concerns. Mechanism results provide suggestive evidence for pathways through liquidity buffers, entrepreneurship, non‐farm employment, and productive fixed assets. The association is weaker among households with Internet use, consistent with the possibility that digital access reduces reliance on traditional renqing networks. Subsample analyses indicate broadly stable associations, with somewhat larger point estimates among older, low‐income, and western households. The findings offer policy implications for rural social‐capital governance and income support under China's rural revitalization strategy.