Working Paper: CEPR ID: DP10125
Authors: Joachim de Weerdt; Garance Genicot; Alice Mesnard
Abstract: This paper studies asymmetry of information and transfers within a unique data set of 712 extended family networks from Tanzania. Using cross-reports on asset holdings, we construct measures of misperception of income among all pairs of households belonging to the same network. We show that there is significant asymmetry of information and no evidence of major systematic over-evaluation or under-evaluation of income in our data, although there is a slight over-evaluation on the part of migrants regarding non-migrants. We develop a static model of asymmetric information that contrasts altruism, pressure and exchange as motives to transfer. The model makes predictions about the correlations between misperceptions and transfers under these competing explanations. Testing these predictions in the data gives support to the model of transfers under pressure or an exchange motive with the recipient holding all the bargaining power.
Keywords: Altruism; Asymmetric Information; Exchange; Family Networks; Pressure; Transfers
JEL Codes: F22; F24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Misperceptions of income (D31) | Private transfers (F16) |
| Misperceptions of income (D31) | Recipient's misperception of donor's wealth (D64) |
| Recipient's misperception of donor's wealth (D64) | Private transfers (F16) |
| Donor's misperception of recipient's wealth (D64) | Private transfers (F16) |
| Physical and social distance (I14) | Misperceptions of income (D31) |
| Pressure model and exchange motives (F31) | Private transfers (F16) |