DP10125 Asymmetry of Information within Family Networks

Author(s): Joachim De Weerdt, Garance Genicot, Alice Mesnard
Publication Date: September 2014
Keyword(s): Altruism, Asymmetric Information, Exchange, Family Networks, Pressure, Transfers
JEL(s): F22, F24
Programme Areas: Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=10125

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 gives support to the model of transfers under pressure or an exchange motive with the recipient holding all the bargaining power.