The Impact of Intra-Household Income Hiding on Labor Productivity

Alex Zhou and Ruchi Mahadeshwar
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Alex Zhou: Department of Economics, University of Warwick,
Ruchi Mahadeshwar: Department of Economics, Brown University,

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: Despite its recognized inefficiency, the persistence of income hiding between spouses remains largely unaddressed in the literature. Our study suggests that one cause of persistency is that this behavior may provide strategic benefits, particularly by affecting labor supply decisions and overall household income. Using a field experiment involving low-income workers in Southeast Asia, we estimate the effects of randomly disclosing spousal income on productivity in a standardized work task. Our findings indicate that income disclosure significantly affects labor productivity compared to a nondisclosure scenario, in which spouses can conceal any income generated. The effects exhibit notable gender differences: when income is disclosed to their spouses, women decrease productivity, while men increase productivity. We introduce a two-stage game model and further empirical tests to demonstrate that these gender differences arise from disparities in bargaining power, with men holding significantly more bargaining power than women. Overall, this study sheds light on the unintended consequences of financial inclusion or pay transparency policies on both productivity and household inequality.

Date: 2024
New Economics Papers: this item is included in nep-eff, nep-exp, nep-fle, nep-lma and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:1525

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