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Ties that Bind: The Kin System as a Mechanism of Income-Hiding between Spouses in Rural Ghana

  • Castilla, Carolina

I 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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File URL: http://purl.umn.edu/104072
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Paper provided by Agricultural and Applied Economics Association in its series 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania with number 104072.

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Date of creation: 2011
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Handle: RePEc:ags:aaea11:104072
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  1. Rosenzweig, Mark R, 1990. "Population Growth and Human Capital Investments: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S38-70, October.
  2. Martin Browning & Pierre-Andre Chiappori, 1994. "Efficient Intra-Household Allocations: a General Characterization and Empirical Tests," Department of Economics Working Papers 1994-02, McMaster University.
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  5. Ligon, Ethan, 2002. "Dynamic bargaining in households (with an application to Bangladesh)," CUDARE Working Paper Series 972, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  6. Nava Ashraf, 2009. "Spousal Control and Intra-household Decision Making: An Experimental Study in the Philippines," American Economic Review, American Economic Association, vol. 99(4), pages 1245-77, September.
  7. Udry, Christopher, 1996. "Gender, Agricultural Production, and the Theory of the Household," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 1010-46, October.
  8. Junsen Zhang & William Chan, 1999. "Dowry and Wife's Welfare: A Theoretical and Empirical Analysis," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 786-808, August.
  9. Hoff, Karla & Sen, Arijit, 2005. "The kin system as a poverty trap?," Policy Research Working Paper Series 3575, The World Bank.
  10. Chen, Joyce J., 2013. "Identifying non-cooperative behavior among spouses: Child outcomes in migrant-sending households," Journal of Development Economics, Elsevier, vol. 100(1), pages 1-18.
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