Are gifts and loans between households voluntary?
Using village date from Tanzania, we test whether gifts and loans between households are voluntary while correcting for mis-reporting by the giving and receiving households. Tow maintained assumptions underlie our analysis: answers to a question on who people would turn to for help are good proxies for willingness to link: and, conditional on regressors, the probability of reporting a gift or loan is independent between giving and receiving households. Building on these assumptions, we develop a new estimation methodology and gift giving are voluntary, then both households should, want to rely on each other for help. We find only weak evidence to support bilateral formation. We do, however, find reasonably strong evidence to support unilateral link formation. Results suggest that if a household wishes to enter in a reciprocal relationship with someone who is sufficiently close socially and geographically, it can do so unilaterally.
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