Asymmetry of Information within Family Networks

56 Pages Posted: 2 Nov 2015 Last revised: 3 Apr 2021

See all articles by Joachim De Weerdt

Joachim De Weerdt

University of Antwerp - Institute of Development Policy and Management; KU Leuven - Centre for Institutions and Economic Performance (LICOS)

Garance Genicot

Georgetown University - Department of Economics

Alice Mesnard

City University London

Date Written: October 2015

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.

Suggested Citation

De Weerdt, Joachim and Genicot, Garance and Mesnard, Alice, Asymmetry of Information within Family Networks (October 2015). NBER Working Paper No. w21685, Available at SSRN: https://ssrn.com/abstract=2684989

Joachim De Weerdt (Contact Author)

University of Antwerp - Institute of Development Policy and Management ( email )

City campus building S
Lange Sint Annastraat 7
Antwerp, 2000
Belgium

KU Leuven - Centre for Institutions and Economic Performance (LICOS) ( email )

Waaistraat 6 - box 3511
Leuven, 3000
Belgium

Garance Genicot

Georgetown University - Department of Economics ( email )

Washington, DC 20057
United States
202-687-7144 (Phone)
202-687-6102 (Fax)

HOME PAGE: http://www.georgetown.edu/faculty/gg58

Alice Mesnard

City University London ( email )

Northampton Square
London, EC1V OHB
United Kingdom

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