Posted by Eivind Tandberg
One of the sure signs that Christmas is approaching is that economic journals contain increasing numbers of references to the classic article by Joel Waldfogel: The Deadweight Loss of Christmas (American Economic Review, December 1993). In a discipline where attempts to combine rigorous analysis and humour are few and far between, this article stands out in many ways.
Waldfogel's paper uses stringent matematics and survey results to estimate the efficiency loss of Christmas present giving in the US. The deadweight loss arises because the recipient's valuation of the gifts may be significantly less than the actual cost of providing these presents. Waldfogel estimates this loss to be between 1/10 and 1/3 of the value of the gifts. In 1992 this loss amounted to between 4 and 13 Billion USD. In comparison, the deadweight loss of income taxation in the US at that time was estimated to be about 50 billion USD.
As interesting as the original paper, are the many other articles that have been inspired by it. If you google "Deadweight loss of Christmas" you will get a long list of different articles and blog postings. Some of these take issue with the thoretical foundation for Waldfogel's work, his research design or with technical details of the paper. Others are more concerned about the moral and societal implications.
