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Is Informal Redistribution Costly? Evidence from a Lab-in-the-Field Experiment in Senegal

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  • Marie Boltz
  • Karine Marazyan
  • Paola Villar

Abstract

In Sub-Saharan Africa, individuals frequently transfer a substantial share of their resources to members of their social networks. Social pressure to redistribute, however, can induce disincentive effects on resource allocation decisions. This paper measures and characterizes the costs of redistributive pressure by estimating individuals’ willingness to pay (WTP) to hide their income. The study estimates a social tax due to informal redistribution of 10 percent. Moreover, it shows that individuals are willing to escape from the redistributive pressure exerted mainly by extended family members.

Suggested Citation

  • Marie Boltz & Karine Marazyan & Paola Villar, 2020. "Is Informal Redistribution Costly? Evidence from a Lab-in-the-Field Experiment in Senegal," The World Bank Economic Review, World Bank, vol. 34(Supplemen), pages 72-78.
    • Handle: RePEc:oup:wbecrv:v:34:y:2020:i:supplement_1:p:s72-s78.
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    1. Boltz, Marie & Marazyan, Karine & Villar, Paola, 2019. "Income hiding and informal redistribution: A lab-in-the-field experiment in Senegal," Journal of Development Economics, Elsevier, vol. 137(C), pages 78-92.
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    5. Grimm, Michael & Hartwig, Renate & Lay, Jann, 2017. "Does forced solidarity hamper investment in small and micro enterprises?," Journal of Comparative Economics, Elsevier, vol. 45(4), pages 827-846.
    6. Carolina Castilla & Thomas Walker, 2013. "Is Ignorance Bliss? The Effect of Asymmetric Information between Spouses on Intra-household Allocations," American Economic Review, American Economic Association, vol. 103(3), pages 263-268, May.
    7. Gonne Beekman & Marcel Gatto & Eleonora Nillesen, 2015. "Family Networks and Income Hiding: Evidence from Lab-in-the-Field Experiments in Rural Liberia," Journal of African Economies, Centre for the Study of African Economies, vol. 24(3), pages 453-469.
    8. Goldberg, Jessica, 2017. "The effect of social pressure on expenditures in Malawi," Journal of Economic Behavior & Organization, Elsevier, vol. 143(C), pages 173-185.
    9. Jean-Marie Baland & Catherine Guirkinger & Charlotte Mali, 2011. "Pretending to Be Poor: Borrowing to Escape Forced Solidarity in Cameroon," Economic Development and Cultural Change, University of Chicago Press, vol. 60(1), pages 1-16.
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