Journal Article

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

Pamela Jakiela and Owen Ozier

in The Review of Economic Studies

Volume 83, issue 1, pages 231-268
Published in print January 2016 | ISSN: 0034-6527
Published online September 2015 | e-ISSN: 1467-937X | DOI: https://dx.doi.org/10.1093/restud/rdv033
Does Africa Need a Rotten Kin Theorem? Experimental Evidence from Village Economies

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  • Design of Experiments
  • Information, Knowledge, and Uncertainy
  • Economic Development

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This article measures the economic impacts of social pressure to share income with kin and neighbours in rural Kenyan villages. We conduct a lab experiment in which we randomly vary the observability of investment returns to test whether subjects reduce their income in order to keep it hidden. We find that women adopt an investment strategy that conceals the size of their initial endowment in the experiment, though that strategy reduces their expected earnings. This effect is largest among women with relatives attending the experiment. Parameter estimates suggest that women anticipate that observable income will be “taxed” at a rate above 4%; this effective tax rate nearly doubles when kin can observe income directly. At the village level, we find an association between the willingness to forgo expected return to keep income hidden in the laboratory experiment and worse economic outcomes outside the laboratory.

Keywords: Lab-in-the-field experiment; Social pressure; Mixed logit; Gender; C91; C93; D81; O12

Journal Article.  20419 words.  Illustrated.

Subjects: Design of Experiments ; Information, Knowledge, and Uncertainy ; Economic Development

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