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Are Gifts and Loans between Households Voluntary?

  • Marcel Fafchamps
  • Margherita Comola

Using village data from Tanzania, we test whether gifts and loans between households are voluntary while correcting for mis-reporting by the giving and receiving households.� Two 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 that corrects for response bias.� Our testing strategy is based on the idea that, if lending 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 link 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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File URL: http://www.csae.ox.ac.uk/workingpapers/pdfs/2010-20text.pdf
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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number CSAE WPS/2010-20.

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Date of creation: 01 Jun 2010
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Handle: RePEc:oxf:wpaper:csae-wps/2010-20
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