The decline in holiday gift-giving

Gift-giving during the holiday season isn’t what it used to be. Research from a University of Minnesota Carlson School of Management professor suggests there’s been a decline in December retail sales in recent decades. The study looked at aggregate U.S. data on annual income and monthly retail sales from 1914 to 2020.

Professor Joel Waldfogel has studied the economics of holiday gift-giving throughout his career, publishing research papers and the book "Scroogenomics: Why You Shouldn't Buy Presents for the Holidays." He can speak on what long-term trends might mean for this season as well as the potential inefficiencies of gift-giving.

Joel Waldfogel, PhD

“A shift in holiday spending is underway. Throughout the 20th century, holiday gift-giving rose with household income until about 2000. Since then, holiday spending per household has fallen by roughly a third.

“The big question is what is driving that downward shift? The answer is a bit unclear. The growing trend of gift cards could be a component because gift cards don’t show up in retail sales until they are redeemed, which may happen outside of December. It could also be that people are opting to buy experiences, like a summer vacation, instead of gifts. However, those components may not fully explain what the true catalyst is for the gift-giving retreat.

“In general, gift-giving can be tricky because a gift might not match the recipient’s preferences. That mismatch can lead to “deadweight loss,” in which each gift-giving dollar you spend delivers about 80 cents in value to the recipient. Ultimately, picking out the right gift is a challenge. Being attentive and listening this holiday season can go a long way.”

Joel Waldfogel is a professor in the Carlson School’s Strategic Management and Entrepreneurship department. His main research interests are industrial organization and law and economics, and he has conducted empirical studies of price advertising, media markets, the operation of differentiated product markets and issues related to digital products, including piracy, pricing and revenue sharing.