Discussion paper

DP11889 consumption and investment in resource pooling family networks

This paper examines a novel motive for resource pooling in family networks in rural
economies: to relax credit constraints and facilitate investment in non-collateralizeable assets
for which credit market imperfections are most binding. We thus complement established
literature examining risk-sharing motives for resource transfers within family networks, as
well as motives based on kinship tax obligations. We do so exploiting the Progresa program
data, in which family networks can be identified, households are subject to large exogenous
resource inflows, and detailed responses on consumption and an array of investments can be
tracked in a household panel over five years. We find that for every dollar that accrues to
the family network through Progresa transfers, food consumption expenditures increase by
around 65c for both households eligible for Progresa and ineligible members of the same family
network. Hence the marginal propensity of families to invest/save out of every dollar is
around .35, and we document how this is channeled towards easing credit constraints poorer
network members face in financing non-collateralizable investments into their children’s human
capital. We show these consumption and investment benefits of being embedded within
a family network are sustained …ve years after households first experience resource transfers
from Progresa. Hence the interplay between resource inflows and resource pooling by family
networks can place network members on sustained paths out of poverty.


De Giorgi, G, I Rasul and M Angelucci (2017), ‘DP11889 consumption and investment in resource pooling family networks‘, CEPR Discussion Paper No. 11889. CEPR Press, Paris & London. https://cepr.org/publications/dp11889