Ties that Bind: The Kin System as a Mechanism of Income-Hiding between Spouses in Rural Ghana
AbstractI present a simple model of intra-household allocation between spouses to show that when the quantity of resources available to the household is not perfectly observed by both spouses, hiding of income can occur even when revelation of the additional resources increases bargaining power. From the model, a test to identify income hiding empirically is derived. For the empirical application, a household survey conducted in Southern Ghana is used. I exploit the variation in the degree of asymmetric information between spouses, measured as the difference between the husband’s own reporting of farm sales and the wife’s reporting of his farm sales, to test whether the allocation of resources is consistent with hiding. For identification, the wife’s clan and the husband’s bride-wealth payments upon marriage are used as instruments for asymmetric information. My findings indicate that allocations are suggestive of men hiding farm sales income in the form of gifts to extended family members, which are not closely monitored. It is unclear whether hiding has negative consequences in the long run because hiding occurs in the form of gifts, instead of expenditure in alcohol or tobacco. If the gifts represent a form of risk-sharing, then these gifts will return to the household in the future, and hiding is not necessarily inefficient. However, if these gifts are motivated by social pressure then hiding can result on poverty traps caused by kin system. The wife’s response is also suggestive of hiding. As information asymmetries increase, she reduces her expenditure in non-essential items, such as prepared foods and oil, but increases personal spending. Expenditure in oil is one of the main sources of calories among poor households in the region.
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Bibliographic InfoPaper provided by Agricultural and Applied Economics Association in its series 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania with number 104072.
Date of creation: 2011
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incomplete information; income hiding; non-cooperative family bargaining; Consumer/Household Economics; International Development; D13; D82; J12;
Other versions of this item:
- Castilla, Carolina, 2013. "Ties that bind: The kin system as a mechanism of income-hiding between spouses in rural Ghana," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
- D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-24 (All new papers)
- NEP-CTA-2011-05-24 (Contract Theory & Applications)
- NEP-DEV-2011-05-24 (Development)
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