Title

Ties that Bind: The Kin System as a Mechanism of Income-Hiding between Spouses in Rural Ghana

Document Type

Working Paper

Publication Date

2011

JEL Codes

D13, D82, J12

Abstract

I present a model of intra-household allocation to show that when income is not perfectly observed by both spouses, hiding of income can occur even when revelation increases bargaining power. I draw data from Ghana and 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 is consistent with hiding. Findings indicate that allocations are suggestive of men hiding farm sales income in the form of gifts to extended family members. The wife’s response is also suggestive of hiding. As information asymmetries increase, she reduces her expenditure in non-essential items, such as prepared foods and oil, but increases personal spending. Expenditure in oil is one of the main sources of calories among poor households in the region.