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The kin system as a poverty trap?


  • Hoff, Karla
  • Sen, Arijit


An institution found in many traditional societies is the extended family system (kin system), an informal system of shared rights and obligations among extended family for the purpose of mutual assistance. In predominantly non-market economies, the kin system is a valuable institution providing critical community goods and insurance services in the absence of market or public provision. But what happens when the market sector grows in the process of economic development? How do the members of kin groups respond, individually and collectively, to such changes? When the kin system"meets"the modern economy, does the kin system act as a"vehicle of progress"helping its members adapt, or as an"instrument of stagnation"holding back its members from benefiting from market development? In reality, the consequences of membership in a kin group have been varied for people in different parts of the world. Hoff and Sen characterize the conditions under which the kin system becomes a dysfunctional institution when facing an expanding modern economy. The authors first show that when there are moral hazard problems in the modern sector, the kin system may exacerbate them. When modern sector employers foresee that, they will offer employment opportunities on inferior terms to members of ethnic groups that practice the kin system. These entry barriers in the market, in turn, create an incentive for some individuals to break ties with their kin group, which hurts members of the group who stay back in the traditional sector. The authors then show in a simple migration model that if a kin group can take collective action to raise exit barriers, then even if migrating to the modern sector and breaking ties increases aggregate welfare (and even if a majority of members are expected to gain ex post, after the resolution of uncertainty about the identity of the winners and losers), a majority of agents within a kin group may support ex ante raising the exit barrier to prevent movement to the modern sector. This result is an example of the bias toward the status quo analyzed by Raquel Fernandez and Dani Rodrik in the context of trade reform. The authors do not claim that all kin groups will necessarily exhibit such a bias against beneficial regime changes. But they provide a clear intuition about the forces that can lead to the collective conservatism of a kin system facing expanding opportunities in a market economy-forces that can lead the kin group to become a poverty trap for its members.

Suggested Citation

  • Hoff, Karla & Sen, Arijit, 2005. "The kin system as a poverty trap?," Policy Research Working Paper Series 3575, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3575

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    References listed on IDEAS

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    2. Blattman, Christopher & Fiala, Nathan & Martinez, Sebastian, 2011. "Employment generation in rural Africa : mid-term results from an experimental evaluation of the Youth Opportunities Program in Northern Uganda," Social Protection and Labor Policy and Technical Notes 66523, The World Bank.
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    5. Basu, Kaushik, 2006. "Participatory Equity, Identity, and Productivity: Policy Implications for Promoting Development," Working Papers 06-06, Cornell University, Center for Analytic Economics.
    6. Pal, Sarmistha & Wahhaj, Zaki, 2017. "Fiscal decentralisation, local institutions and public good provision: evidence from Indonesia," Journal of Comparative Economics, Elsevier, vol. 45(2), pages 383-409.
    7. Landmann, Andreas & Vollan, Björn & Frölich, Markus, 2012. "Insurance versus Savings for the Poor: Why One Should Offer Either Both or None," IZA Discussion Papers 6298, Institute for the Study of Labor (IZA).
    8. Mario Piacentini, 2008. "Migration Enclaves, Schooling Choices and Social Mobility," Development Working Papers 265, Centro Studi Luca d'Agliano, University of Milano.
    9. Dupas, Pascaline & Keats, Anthony & Robinson, Jonathan, 2015. "The Effect of Savings Accounts on Interpersonal Financial Relationships: Evidence from a Field Experiment in Rural Kenya," CEPR Discussion Papers 10689, C.E.P.R. Discussion Papers.
    10. Luciano Fanti & Luca Spataro, 2008. "Poverty traps and intergenerational transfers," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(6), pages 693-711, December.
    11. Aghajanian, Alia Jane, 2016. "Social capital and conflict: impact and implications," Economics PhD Theses 0116, Department of Economics, University of Sussex.
    12. Boris Gershman, 2016. "Long-Run Development and the New Cultural Economics," Working Papers 2016-06, American University, Department of Economics.
    13. Tanguy Bernard & Alain De Janvry & Elisabeth Sadoulet, 2010. "When Does Community Conservatism Constrain Village Organizations?," Economic Development and Cultural Change, University of Chicago Press, vol. 58(4), pages 609-641, July.
    14. Subramanian, Arjunan & Qaim, Matin, 2006. "Competition, Kinship or Reciprocity? Village Experiments in Alternative Modes of Exchange," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25434, International Association of Agricultural Economists.
    15. Skoufias, Emmanuel & Lunde, Trine & Patrinos, Harry Anthony, 2009. "Social networks among indigenous peoples in Mexico," Policy Research Working Paper Series 4949, The World Bank.
    16. Kaushik Basu & Amanda J. Felkey, 2009. "A theory of efficiency wage with multiple unemployment equilibria: how a higher minimum wage law can curb unemployment," Oxford Economic Papers, Oxford University Press, vol. 61(3), pages 494-516, July.
    17. Hoff, Karla & Pandey, Priyanka, 2014. "Making up people—The effect of identity on performance in a modernizing society," Journal of Development Economics, Elsevier, vol. 106(C), pages 118-131.
    18. Castilla, Carolina, 2011. "Ties that Bind: The Kin System as a Mechanism of Income-Hiding between Spouses in Rural Ghana," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 104072, Agricultural and Applied Economics Association.
    19. Garofalo, M.R. & Marra, M, 2007. "Work-Life Reconciliation Policies From Well-Being To Development: Rethinking EU Gender Mainstreaming," MPRA Paper 9598, University Library of Munich, Germany.
    20. Sindzingre, Alice, 2005. "Explaining Threshold Effects of Globalization on Poverty: An Institutional Perspective," WIDER Working Paper Series 053, World Institute for Development Economic Research (UNU-WIDER).
    21. Hoff, Karla & Pandey, Priyanka, 2012. "Making up people -- the effect of identity on preferences and performance in a modernizing society," Policy Research Working Paper Series 6223, The World Bank.
    22. Castilla, Carolina & Walker, Thomas F., 2012. "Gender Roles and Intra-Household Allocation: Identifying Differences in the Incentives to Hide Money Across Spouses in Ghana," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124923, Agricultural and Applied Economics Association.
    23. Kaushik Basu, 2008. "The Enigma of India," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 396-406, June.
    24. Patrinos, Harry Anthony & Skoufias, Emmanuel & Lunde, Trine, 2007. "Indigenous peoples in Latin America : economic opportunities and social networks," Policy Research Working Paper Series 4227, The World Bank.
    25. Alice Nicole Sindzingre, 2007. "Poverty traps: a perspective from development economics," EconomiX Working Papers 2007-26, University of Paris Nanterre, EconomiX.

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