January 25, 2016
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Posted by NCID

Marie Boltz, Ph.D from the Paris School of Economics and current Post-doctoral fellow at the University of Namur, presented at the NCID her paper “Income Hiding and Informal Redistribution: A Lab-in-the-field Experiment in Senegal”, which "uniquely combines a lab-in-the field and a small scale randomized controlled trial”, explained Marie Boltz.

The paper aims to analyze the hidden cost of informal redistribution in economies where people heavily rely on their social networks and have limited access to financial markets.

“In Sub-saharan Africa transfers within the extended family and beyond are frequent and represent substantial amounts,” said Marie Boltz and added: “All this pressure to redistribute might act as a form of kinship taxation where people react to this pressure to redistribute their resources.”

This informal redistribution may be motivated by social status seeking, culture or even pure altruism according to Marie Boltz.

Her research tries to answer three main questions: (1) Who is trying to escape redistributive pressures and how much do they value being able to relax these pressures? (2) What are the distortions in resource allocation choices caused by the redistributive pressure? (3) From whom are people hiding? Their household members, their kin outside the household, or their neighbors?

One of her main findings is that 2/3 of participants prefer income privacy, as a way to avoid the kinship taxation and when given the choice between receiving an amount publicly, or receiving a smaller amount, but in private, they were willing to give up 14% of the total to receive it in private. She also measured a key part of why this occurs, measuring that receiving in private allows them to decrease the amount they redistribute by 27%.  With those savings, “they reallocate this extra money to health and personal expenses”, said Boltz. Lastly, she found women preferred to hide income only from kin outside the household, while men preferred to hide from household members, as well as outside kin.

According to Boltz, the paper’s main contribution is that it is the first experiment “to estimate the impact of redistributive pressure on individual real-life allocation decisions and to relate it to elicited preferences for avoiding the kinship tax.”

 

Full Paper.

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