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Asymmetry of Information within Family Networks

Mesnard, A., Genicot, G. and De Weerdt, J. (2016). Asymmetry of Information within Family Networks (Report No. 16/13). Department of Economics, City, University of London.

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.

Publication Type: Monograph (Working Paper)
Additional Information: © 2016 The Authors.
Publisher Keywords: Asymmetric Information, Transfers, Pressure, Exchange, Altruism
Subjects: H Social Sciences > HB Economic Theory
Departments: School of Arts & Social Sciences > Economics > Discussion Paper Series
URI: http://openaccess.city.ac.uk/id/eprint/16740
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