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Intra-Household Resource Management Structure and Income-Hiding under Incomplete Information

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  • Castilla, Carolina

Abstract

There is evidence that some multi-person households may withhold income transfers, such as bonuses, gifts, and cash transfers, from other members of the household (Ashraf (2009); Vogler and Pahl, (1994)). In this paper, I show that the incentives to hide income under incomplete information regarding the quantity of resources available to the household differ for three different household resource management structures. I illustrate this with a simple two-stage game. In the first stage, one spouse receives a monetary transfer that is unobserved by her spouse, and she must decide whether to reveal or to hide it. In the second stage, spouses bargain over the allocation of resources between a household good and private expenditure. The three models differ in the resource allocation mechanism that takes place in second stage of the game: housekeeping allowance, independent management, and joint management. Results indicate that when one spouse receives a monetary transfer that is unobservable to her spouse, hiding is more likely to occur in households with a housekeeping allowance contract, compared to independent or joint management. In joint management households, however, a spouse may hide in equilibrium if the change in bargaining power associated with revealing the transfer is not significant enough to compensate for the loss in discretionary expenditure.

Suggested Citation

  • Castilla, Carolina, 2010. "Intra-Household Resource Management Structure and Income-Hiding under Incomplete Information," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61607, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea10:61607
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    File URL: http://purl.umn.edu/61607
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    References listed on IDEAS

    as
    1. Siwan Anderson & Jean-Marie Baland, 2002. "The Economics of Roscas and Intrahousehold Resource Allocation," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 963-995.
    2. Valérie Lechene & Ian Preston, 2005. "Household Nash equilibrium with voluntarily contributed public goods," IFS Working Papers W05/06, Institute for Fiscal Studies.
    3. Marcel Fafchamps & Bereket Kebede, 2006. "Intrahousehold Welfare," Economics Series Working Papers GPRG-WPS-044, University of Oxford, Department of Economics.
    4. Vivian Hoffmann, 2009. "Intrahousehold Allocation of Free and Purchased Mosquito Nets," American Economic Review, American Economic Association, vol. 99(2), pages 236-241, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    incomplete information; household bargaining; resource management systems; Demand and Price Analysis; Labor and Human Capital; D13; D82; J12;

    JEL classification:

    • 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

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