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Business is Tough, but Family is Worse: Household Bargaining and Investment in Microenterprises in Uganda

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  • Nathan Fiala

    (University of Connecticut)

Abstract

I present evidence that intra-household decision making affects business investment decisions and household welfare. I interact the results from a behavioral experiment that allows spouses to hide money from each other with an experiment that delivered capital to business owners in Uganda. Businesses were randomly selected to receive capital through a loan or grant, or capital paired with training. I find evidence that the grant with training treatment had medium-term economic impacts when given to men, but there are no effects from the other treatments for men or women. I also find that the loan with training treatment had impacts on the income of spouses of women, though women do not know about these effects. The results from the incentivized behavioral game correlate significantly with household economic outcomes: men who do not hide money from their wives show higher economic outcomes from the treatments, while those who hide money show a negative change relative to a control group. The opposite is the case for women: women who hide money from their husbands show increased economic outcomes, while those who do not hide money see a decrease in outcomes. The results are consistent with strong female household constraints where women have little control over resources in the family and so hiding money is the only way to keep control of it. Men have less fear of losing control of money in the household, and so those that hide money likely have serious household issues that lead to significant negative investment behavior. The results help to explain why women with existing enterprises have performed so poorly in previous capital experiments and why researchers have failed to find impacts from microfinance.

Suggested Citation

  • Nathan Fiala, 2017. "Business is Tough, but Family is Worse: Household Bargaining and Investment in Microenterprises in Uganda," Working papers 2017-05, University of Connecticut, Department of Economics.
  • Handle: RePEc:uct:uconnp:2017-05
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    1. Kelsey Jack & Seema Jayachandran & Sarojini Rao, 2018. "Environmental Externalities and Free-riding in the Household," NBER Working Papers 24192, National Bureau of Economic Research, Inc.
    2. Vollan, Björn & Hadnes, Myriam & Nilgen, Marco & Kosfeld, Michael, 2021. "The Fetters of the Sib: An Experimental Study in Burkina Faso," IZA Discussion Papers 14147, Institute of Labor Economics (IZA).
    3. Steinert, Janina Isabel & Vasumati Satish, Rucha & Stips, Felix & Vollmer, Sebastian, 2022. "Commitment or concealment? Impacts and use of a portable saving device: Evidence from a field experiment in urban India," Journal of Economic Behavior & Organization, Elsevier, vol. 193(C), pages 367-398.
    4. Hoel, Jessica B. & Hidrobo, Melissa & Bernard, Tanguy & Ashour, Maha, 2021. "What do intra-household experiments measure? Evidence from the lab and field," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 337-350.
    5. Emma Riley, 2024. "Resisting Social Pressure in the Household Using Mobile Money: Experimental Evidence on Microenterprise Investment in Uganda," American Economic Review, American Economic Association, vol. 114(5), pages 1415-1447, May.
    6. Friedson-Ridenour, Sophia & Pierotti, Rachael S., 2019. "Competing priorities: Women’s microenterprises and household relationships," World Development, Elsevier, vol. 121(C), pages 53-62.
    7. Helke Seitz, 2020. "Subgroup Analysis of Investment Constraints: Evidence from Ugandan Microenterprises," Discussion Papers of DIW Berlin 1920, DIW Berlin, German Institute for Economic Research.
    8. Tara Bedi & Anu Jose & Michael King, 2023. "Mental Accounting, Spousal Control and Intra-Household Communication: Evidence from an Experiment in India," Trinity Economics Papers TEP1323, Trinity College Dublin, Department of Economics.
    9. Charlotte Ringdal & Ingrid Hoem Sjursen, 2021. "Household Bargaining and Spending on Children: Experimental Evidence from Tanzania," Economica, London School of Economics and Political Science, vol. 88(350), pages 430-455, April.
    10. Jack, B. Kelsey & Jayachandran, Seema & Malagutti, Flavio & Rao, Sarojini, 2024. "Environmental externalities and free-riding in the household," Journal of Development Economics, Elsevier, vol. 170(C).
    11. Steinert, Janina Isabel & Cluver, Lucie Dale & Meinck, Franziska & Doubt, Jenny & Vollmer, Sebastian, 2018. "Household economic strengthening through financial and psychosocial programming: Evidence from a field experiment in South Africa," Journal of Development Economics, Elsevier, vol. 134(C), pages 443-466.
    12. Bulte, Erwin H. & Lensink, Robert & Winkel, Anne B., 2018. "The impact of a gender and business training on income hiding: An experimental study in Vietnam," Journal of Economic Behavior & Organization, Elsevier, vol. 148(C), pages 241-259.
    13. Lars Ivar Oppedal Berge & Armando José Garcia Pires, 2020. "Gender, formality, and entrepreneurial success," Small Business Economics, Springer, vol. 55(4), pages 881-900, December.

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    More about this item

    Keywords

    Economic development; microenterprises; microfinance; cash grants; entrepreneurship training; credit constraints;
    All these keywords.

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M53 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Training

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