Centre for Development Economics
Department of Economics, Delhi School of Economics


The Economic Consequences of Mutual Help in Extended Families


Jean-Marie Baland

University of Namur

Tuesday, 10th September 2013 at 3:00 PM

Venue : Seminar Room (First Floor)
Department of Economics, Delhi School of Economics

All are cordially invited


In the absence of well-developed markets for credit and insurance, extended families play a major role as a traditional systems of mutual help. However these arrangements also involve important inefficiencies. As stressed by Kennedy (1988) and Platteau (1991), the taxation implicit in family transfers has large disincentive effects, in particular on effort and investment. In this paper, we use first hand data from Western Cameroon to explore this question. We find that the large majority of transfers follow a given pattern whereby elder siblings support their younger siblings in the early stages of their lives who in turn reciprocate by supporting their elder siblings when they have children. We interpret this pattern as a generalized system of informal credit within the extended family. We then explore the implications of this pattern on labour market outcomes and find evidence for strong negative effects. Moreover this pattern implies that younger siblings tend to be net donors at the time at which their own children are growing up which has consequences for fertility and education outcomes. As expected, we find that younger siblings have fewer children who also tend to be less educated.

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