UC Davis Agricultural and Resource Economics

Marcel Fafchamps, University of Oxford

Are Gifts and Loans between Households Voluntary?

Date and Location

Monday, May 14, 2012, 4:10 PM - 5:30 PM
ARE Conference Room, 2102 Social Sciences and Humanities


We propose a simple test of unilateral versus bilateral link formation using a maximum likelihood estimator that deals with mis-reporting. This estimator is suitable for pairwise data sources with multiple discordant measures. We illustrate the methodology using dyadic data on inter-household gifts and loans from the village of Nyakatoke in Tanzania. We find reasonably strong evidence in favor of unilateral link formation: if a household wishes to enter in a relationship with someone who is suciently close socially and geographically, it can do so unilaterally. Flows of gifts and loans between two households are nevertheless more likely if both households wish to link. We show that not taking mis-reporting into account leads to serious underestimation of the total amount of gifts and loans between villagers.

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