Family Networks and Income Hiding: Evidence from Lab-in-the-Field Experiments in Rural Liberia

Abstract

This study investigates the relationship between family network density and income hiding in rural Liberia. We link people's behaviour in a modified lottery experiment and a time preference game to detailed information about their family networks. We find that individuals with a dense family network are more likely to pay a fraction of their endowment to hide their earnings from the experiment. This association is mainly driven by male respondents. We also find that men with dense family networks have lower discount rates than those with smaller networks. Qualitative responses suggest that these men perceive us as an alternative bank: if they have no immediate purpose for the money, they prefer the research team to keep it for two weeks. This prevents them from spending it on things other than its intended use and may keep predatory members of the family network at bay. The negative association between family network density and investment decisions is stronger if these networks are characterised by members who sought financial support in the past. Taken together, our results offer tentative evidence that dense family networks, under some conditions, have adverse impacts on economic decision-making.

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