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

65 Pages Posted: 20 Apr 2016  

Pamela Jakiela

University of Maryland

Owen W. Ozier

World Bank - Development Economics Group (DEC); World Bank - Development Research Group (DECRG)

Date Written: June 1, 2012

Abstract

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.

Keywords: Economic Theory & Research, Investment and Investment Climate, Emerging Markets, Labor Policies, Debt Markets

Suggested Citation

Jakiela, Pamela and Ozier, Owen W., Does Africa Need a Rotten Kin Theorem? Experimental Evidence from Village Economies (June 1, 2012). World Bank Policy Research Working Paper No. 6085. Available at SSRN: https://ssrn.com/abstract=2082776

Pamela Jakiela

University of Maryland ( email )

College Park
College Park, MD 20742
United States

Owen W. Ozier

World Bank - Development Economics Group (DEC) ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

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