Does Africa Need a Rotten Kin Theorem? Experimental Evidence from Village Economies

This paper measures the economic impact of social pressure to share income with kin and neighbors in rural Kenyan villages. The authors conduct a lab experiment in which they randomly vary the observability of investment returns. The goal is to test whether subjects reduce their income in order to keep it hidden. The analysis finds that women adopt an investment strategy that conceals the size of their initial endowment in the experiment, although that strategy reduces their expected earnings. This effect is largest among women with relatives attending the experiment. Parameter estimates suggest that women behave as though they expect to be pressured to share four percent of their observable income with others, and substantially more when close kin can observe income directly. Although this paper provides experimental evidence from a single African country, observational studies suggest that similar pressure from kin may be prevalent in many rural areas throughout Sub-Saharan Africa.

Bibliographic Details

Main Authors:	Jakiela, Pamela, Ozier, Owen
Language:	English
Published:	World Bank, Washington, DC 2012-06
Subjects:	ACCOUNTING, AFFILIATED ORGANIZATIONS, ASSET HOLDINGS, BANK OPERATIONS, BARGAINING, BORROWING, CREDIT ASSOCIATIONS, CREDIT COOPERATIVES, DECISION MAKING, DECLINE IN INVESTMENT, DEMOGRAPHIC, DEVELOPING ECONOMIES, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DRIVERS, DURABLE, DURABLE ASSET, DURABLE ASSETS, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, EMPLOYMENT, EXCHANGE RATE, EXPECTED UTILITY, EXPERIMENTAL ECONOMICS, HOUSEHOLD BARGAINING, HOUSEHOLD WEALTH, HUMAN DEVELOPMENT, INCENTIVE EFFECTS, INCOME, INCOMES, INSURANCE, INSURANCE MARKETS, INTERNATIONAL BANK, INVESTING, INVESTMENT AMOUNT, INVESTMENT CHOICE, INVESTMENT CHOICES, INVESTMENT DECISION, INVESTMENT DECISIONS, INVESTMENT INCENTIVES, INVESTMENT INCOME, INVESTMENT OPPORTUNITIES, INVESTMENT OPTION, INVESTMENT OPTIONS, INVESTMENT RETURN, INVESTMENT RETURNS, INVESTMENT STRATEGY, LEVEL OF RISK, LEVY, LIQUIDITY, LOAN, LOTTERIES, MARGINAL UTILITY, MAXIMUM LIKELIHOOD ESTIMATION, MICRO ENTERPRISE, MICROENTERPRISES, MUTUAL INSURANCE, OCCUPATIONS, OPTIMAL ALLOCATION, OPTIMAL INVESTMENT, OPTIMIZATION, PARTICIPATION CONSTRAINTS, PAYOUT, PERMANENT INCOME, PRODUCTIVE INVESTMENTS, PROFITABILITY, RESOURCE ALLOCATION, RISK AVERSE, RISK AVERSE INDIVIDUALS, RISK AVERSION, RISK POOLING, RISK PREFERENCE, RISK PREFERENCES, RISKY INVESTMENT, RISKY INVESTMENTS, RISKY SECURITY, SANCTION, SANCTIONS, SAVINGS, SAVINGS ACCOUNT, SAVINGS ACCOUNTS, SELF­HELP, SOCIAL CAPITAL, SOCIAL NETWORKS, TAX, TAX RATE, TAX RATES, TAXATION, UNSKILLED LABOR, UTILITY FUNCTION, UTILITY FUNCTIONS, UTILITY MAXIMIZATION, UTILITY THEORY, WAGES, WEALTH,
Online Access:	http://documents.worldbank.org/curated/en/2012/06/16358327/africa-need-rotten-kin-theorem-experimental-evidence-village-economies https://hdl.handle.net/10986/9337
Tags:	Add Tag No Tags, Be the first to tag this record!