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Local spillovers and durable adoption: Evidence from durable consumptions in rural China

Rong, Zhao and Feng, Yao (2012): Local spillovers and durable adoption: Evidence from durable consumptions in rural China.

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Abstract

Purpose – The effects of social learning and network externalities in the diffusion of a new product imply that there should be local spillovers from existing owners to new adopters in a closely-related community. Using the 1999 durable consumption survey data in rural China, this paper examines the importance of local spillovers in the diffusion of two major durable goods, washing machine and refrigerator. Design/methodology/approach – Based on an October 1999 survey of rural durable goods consumption conducted by the National Bureau of Statistics (NBS) of China, the authors examine the likelihood of rural households adopting a washing machine and a refrigerator during 1998-1999, respectively. Findings – The estimation results indicate that a household is more likely to buy its first durable good in villages where a large share of households already own one. Further evidence suggests that these patterns are unlikely to be explained by unobserved local characteristics. When examined in more detail, the extent of local spillovers appears to be positively related to household education level. Originality/value – Our study reveals the importance of local spillovers in the diffusion of these two durables. Specifically, 64% of washing machine adoptions starting at 1998 are due to the spillovers. For refrigerator adoptions, this percentage is 55%. Furthermore, as far as we know, our study is among the first to test and provide evidence on the interaction between education level and local spillovers based on the learning hypothesis.

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