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Daily Collectors, Public Good Provision and Private Consumption: Theory and Evidence from Urban Benin

  • Vincent Somville

    ()

    (Center for Research in the Economics of Development, University of Namur)

Daily collectors operate worldwide; they charge a fee in exchange for the collection of their client's deposits. The clients recover their savings after one month. With a negative nominal return of -3.3% per month, the service is quite expensive but nonetheless prevalent among the very poor. The economic literature so far emphasizes two motives for making deposits: (i) it is safer than bringing the money home, (ii) people want to commit to save. I argue that in addition to these two motives, people make deposits in order to reduce their contribution to the household's expenses and increase their private consumption. This intra-household motive is first modelled and then tested using a unique panel data set collected in Benin. The panel structure of the data allows me to isolate the effect of the third motive. Additionally, I show that daily collectors enable women to make more gifts to their children and acquaintances, and allow men to reduce those gifts and their participation to household's public goods. There is large positive effect of the deposits on people's purchase of new clothes, and making deposits increases women's expenditures on frivolous goods by 200% to 300%. Finally, the commitment motive appears to be an important determinant of men's deposits.

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File URL: http://www.fundp.ac.be/eco/economie/recherche/wpseries/wp/1106.pdf
File Function: First version, 2011
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Paper provided by University of Namur, Department of Economics in its series Working Papers with number 1106.

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Length: 40 pages
Date of creation: Apr 2011
Date of revision:
Handle: RePEc:nam:wpaper:1106
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