The Deadweight Loss of Christmas Revisited

Abstract

The aim of this paper is to investigate if there is a deadweight loss, (DWL), or gain to society elicited from the gift-exchange during the Christmas holiday in Sweden in 2020. This is done by partly replicating the method used in the famous article The deadweight loss of Christmas, written by Joel Waldfogel (1993). Waldfogel investigates the US Christmas-gift market and de nes a measure which he calls "the average yield", Y = V=C, where he puts recipients' valuations of the received gifts in relation to the prices paid by the givers', for these gifts. He argues that if Y deviates from unity, then there is a loss or gain to society from the gift-exchange. As a second step, he investigates the determinants of the change in welfare with OLS regressions and a Logit regression. We replicate the methods used by Waldfogel (1993). As a contribution, we develop the average yield measure by including the utility of the giver arising from the gift-exchange, and quanti ed measures of the endowment e ect and a transaction cost associated to the consumption of the gift. As a nal contribution we present an alternative method in estimating the change in welfare by using the point estimates from a de ned OLS regression. The main results replicating Waldfogel suggest that the true value ranges between a loss of 20% and a gain of 5%, while our alternative Yield suggest that it is in the interval of a loss of 2% and a gain of 2%. The results from the point estimates point in the direction of a gain to society that lies between 8% and 15.9% of the price paid.