Working Paper: NBER ID: w21685
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 uncovers the active role played by the recipient. Our findings suggest that the recipient sets the terms of the transfers, either by exerting pressure to give on the donor or by holding the bargaining power during the exchange of services with the donor.
Keywords: Asymmetry of Information; Family Networks; Private Transfers; Income Misperception
JEL Codes: D12; O12; O15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| recipient's misperception of donor's income (D64) | amount transferred (F24) |
| misperceptions of income (D31) | dynamics of private transfers (F16) |
| recipient's perception of donor's income (D64) | dynamics of private transfers (F16) |
| type of relationship (altruism, pressure, or exchange) (D64) | correlation between misperceptions and transfers (F16) |