Private Information in the Family

Suzanne Bellue, Matthias Doepke and Michèle Tertilt

No 26084, RFBerlin Discussion Paper Series from ROCKWOOL Foundation Berlin (RFBerlin)

Abstract: Standard models of the family assume that spouses share information. In this paper, we challenge this assumption with theory and evidence. We field a new survey module in the Dutch LISS panel where spouses independently report their knowledge of each other's finances. Private information is pervasive: in 40 percent of couples, at least one partner lacks full knowledge of the other's income. We examine the implications of private information for intrahousehold risk sharing using a mechanism design approach. Our model predicts that a spouse's consumption share rises with their income share when information frictions are present but is independent of income under full information. Constrained-efficient allocations can be sustained without full revelation: each spouse chooses how much money to bring home, and hidden income is never revealed. Evidence from the LISS panel confirms the predictions: a positive relationship between income and consumption shares appears only among imperfectly informed couples. Controlling for limited commitment does not affect this result, suggesting that information asymmetries-rather than commitment frictions-drive departures from full insurance.

Keywords: Private information; Family; Spousal Insurance (search for similar items in EconPapers)
JEL-codes: D10 D82 G52 J12 (search for similar items in EconPapers)
Date: 2026-03
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Persistent link: https://EconPapers.repec.org/RePEc:crm:wpaper:26084

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