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Intra-Household Allocation under Incomplete Information: Examination of Income-Hiding between Spouses

Castilla, Carolina
http://rave.ohiolink.edu/etdc/view?acc_num=osu1306517607

Abstract Details

2011, Doctor of Philosophy, Ohio State University, Agricultural, Environmental and Developmental Economics.
This dissertation examines the interaction between the intra-household resource management structure and asymmetric information over the quantity of resources available to the household as causes of income-hiding between spouses. I illustrate the incentives to hide income through a set of theoretical models, and I identify income-hiding empirically drawing survey data from Ghana. Income-hiding can have negative implications in the effectiveness of poverty alleviation policies, as spouses wishing to successfully hide income must allocate resources away from household public goods, such as child education and health, which are easily monitored. To illustrate the incentives to hide income, I developed a set of related, but distinct, theoretical models that differ in the contract over the allocation of resources between spouses. In Chapter 2, I show that the incentives to hide when income is unobserved by one spouse differ for three different household resource management structures. I illustrate this with a simple two-stage game. In the first stage, one spouse receives a monetary transfer that is unobserved by her spouse, and she must decide whether to reveal or to hide it. In the second stage, spouses bargain over the allocation of resources between a household good and private expenditure. The three models differ in the resource allocation mechanism that takes place in second stage of the game: housekeeping allowance, independent management, and joint management. Results indicate that hiding is more likely to occur in households with a housekeeping allowance contract, compared to independent or joint management. In joint management households, however, a spouse may hide in equilibrium if the change in bargaining power associated with revealing the transfer is not significant enough to compensate for the loss in discretionary expenditure. To identify income-hiding empirically, it is necessary to test whether unobservable resources attributable to one spouse are more likely to be allocated towards goods that are not easily monitored, relative to observable resources. In Chapter 3 I draw data from Southern Ghana. The data contains information on cross-reporting of each spouse’s farm income. I exploit the variation in the degree of asymmetric information between spouses, measured as the difference between the husband’s own reporting of farm sales and the wife’s reporting of his farm sales to test whether the allocation of resources in Ghanaian households is consistent with hiding. For identification, the wife’s clan and the husband’s bride-wealth payments upon marriage are used as instruments for asymmetric information. My findings indicate that men hide farm sales income in the form of gifts to family members other than children and their spouse, which are not closely monitored. In doing so, men give up bargaining power as there is a reduction in observable expenditures such as public transportation. The wife’s response is also consistent with hiding. As information asymmetries increase, she reduces her expenditure in non-essential items, such as prepared foods and oil, but increases personal spending as a result of the gain in bargaining power.
Timothy Haab (Committee Chair)
Joyce Chen (Committee Co-Chair)
Ian Sheldon (Committee Member)
106 p.
Economics
income hiding; intra-household bargaining; asymmetric information between spouses

Recommended Citations

Citations

  • Castilla, C. (2011). Intra-Household Allocation under Incomplete Information: Examination of Income-Hiding between Spouses [Doctoral dissertation, Ohio State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=osu1306517607

    APA Style (7th edition)

  • Castilla, Carolina. Intra-Household Allocation under Incomplete Information: Examination of Income-Hiding between Spouses. 2011. Ohio State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=osu1306517607.

    MLA Style (8th edition)

  • Castilla, Carolina. "Intra-Household Allocation under Incomplete Information: Examination of Income-Hiding between Spouses." Doctoral dissertation, Ohio State University, 2011. http://rave.ohiolink.edu/etdc/view?acc_num=osu1306517607

    Chicago Manual of Style (17th edition)

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This open access ETD is published by The Ohio State University and OhioLINK.