Don't Tell on Me

Abstract

Although most theoretical models of household decisionmaking assume perfect information, empirical studies suggest that information asymmetries can have large impacts on resource allocation. In this study, I demonstrate the importance of these asymmetries in transnational households, where physical distance between family members can make information barriers especially acute. I implement an experiment among migrants in Washington, DC and their families in El Salvador that examines how information asymmetries can have strategic and inadvertent impacts on remittance decisions. Migrants make an incentivized decision over how much of a cash windfall to remit and recipients decide how to spend a remittance. Migrants strategically send home less when their choice is not revealed to recipients but only when recipients can punish migrants for deviation from remittance agreements. Recipients make spending choices closer to migrants’ preferences when those preferences are revealed, suggesting that recipients’ choices are inadvertently affected by imperfect information.

Keywords: households, information asymmetries, intrahousehold allocation, Remittances, Resource allocation, transnational households