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Savings and Sharing Pressure in the Extended Family Evidence from Senegal Marie Boltz-Laemmel Paris School of Economics UNU-Wider Conference - September 21 th , 2013 Marie Boltz-Laemmel Savings and Family Solidarity in Senegal 1 / 31

M OTIVATIONS Starting with a quote “If you have the money, you have to give it, but if you don’t, you don’t need to. In Senegal, you don’t have the possibility to save, because the family is here, there is the pressure, there is the electricity bill of your brother that you need to pay, there are your parents to help... But the moment you start to do something, then they will let you in peace... that’s why I started to build my house on credit.” Alioune, teacher in Guinawrails, poor suburb of Dakar, December 2012. Marie Boltz-Laemmel Savings and Family Solidarity in Senegal 2 / 31

M OTIVATIONS Some elements of context In developing countries, esp. Sub-Saharan Africa (SSA): − limited access to financial markets, − low welfare provision, − structural vulnerability of households to shocks ... inducing two well-documented observations: − the preponderance of kinship and social networks as informal insurance providers (risk sharing), esp. against idiosyncratic shocks, − low saving rates achieved savings, while savings are a mean to protect against aggregated risks. However, few evidence on the effect of social networks on resource accumulation decisions. → Objective here: Investigating the role of the extended family in the decisions to save and transfer. Savings rates Marie Boltz-Laemmel Savings and Family Solidarity in Senegal 3 / 31

M OTIVATIONS The extended family in Senegal “ Kin system ” (Hoff and Sen, 2006), extended family or kinship network = Set of relationships acquired by blood, marriage or adoption. Family (blood) ties are not a matter of choice This “moral economy” (Scott, 1976; Platteau, 1991) entails informal redistribution In Senegal: Lineage-based society Polynuclear households strongly interlinked within the kinship network: importance of the household of origin 70 % of in- and out-transfers (in value) take place within the kin system. Marie Boltz-Laemmel Savings and Family Solidarity in Senegal 4 / 31

L ITERATURE A strong need for commitment to save Recent interests in the economic literature on savings, with the main question: How to increase savings in developing countries? Need for commitment: commitment devices increase drastically demands for savings (Brune et al. , 2011; Atkinson et al. , 2010). What kind of underlying cost for savings does this need for commitment reveal? − limited attention (Karlan et al. , 2011) − preference for present, procrastination behaviors (Basu, 2008; Duflo et al. , 2011) − financial pressure of the kin system (Platteau, 2004) Marie Boltz-Laemmel Savings and Family Solidarity in Senegal 5 / 31

L ITERATURE The ambivalent role of social networks Traditionally, the literature has focused on positive aspects of social networks: e.g. risk sharing, social learning, etc. However, recent work shows more balanced evidence : − Di Falco and Bulte (2012) : households more exposed to social pressure spend more on “non-sharable” goods rather than “sharable” goods. − Jakiela and Ozier, (2012) : experiment showing that a distortion towards less visible but less lucrative investments due to sharing norms; − Baland et al. (2011): “Pretending to Be Poor: Borrowing to Escape Forced Solidarity in Cameroon” (qualitative evidence + theoretical signalling model). Marie Boltz-Laemmel Savings and Family Solidarity in Senegal 6 / 31

R ESEARCH Q UESTION What are the mechanisms observed on the field concerning the role of the “family tax” on savings decisions ? How does the size of and the position in the extended family influence both saving and transfer decisions? Marie Boltz-Laemmel Savings and Family Solidarity in Senegal 7 / 31

M ECHANISMS AT PLAY Field evidence on redistributive pressure Qualitative survey conducted in Senegal : Members of several extended families traced in different locations → better understand mechanisms at play betw. transfers and savings: Redistributing to one’s network reported as a duty , sometimes even as a pride; However, sharing pressure is also often seen as a burden for people, leading to: − Lower revenue left for savings after the family tax ⇒ decrease in savings − Or to family tax evading strategies through reduction in the observability and/or taxability of revenues or assets ⇒ Increase in “non-sharable” or “non-observable” savings. More strategies Marie Boltz-Laemmel Savings and Family Solidarity in Senegal 8 / 31

S AVING TYPES Costs and benefits Non-sharable savings : bank, shopkeeper, ROSCAs, indivisible goods + Asset not easily shared, b/c not observable, not directly available or not divisible. + Money not easily consummed (pref. for present) – Not directly available in case of need. – Entry costs (open a bank account), transportation costs, – Requires trust (ROSCA, shopkeeper), – Returns: low or no interest rate, highly risky for ROSCAs, livestock. Sharable savings : money kept home + Directly available in case of need. – Easily captured by peers within the hh and out of the hh (through transfers) – Easily consummed (pref. for present) – No returns Marie Boltz-Laemmel Savings and Family Solidarity in Senegal 9 / 31

M ECANISMS AT PLAY Redistributive Pressure Figure: The heterogenous effects of a larger extended family for different positions in the network Position in the social network Savings Transfers Total % NS Out In Net out Salient economic difficulties – – – + – Salient economic success – – ++ – ++ Salient economic success & CS + + + – +/0 NS = Non-Sharable savings, CS = Coping Strategies aimed at lessening the pressure to transfer Empirical strategy Marie Boltz-Laemmel Savings and Family Solidarity in Senegal 10 / 31

D ATA “Poverty and Family Structure” in Senegal Nationally representative survey: “Poverty and Family Structure” (PSF), conducted in Senegal in 2006 and 2007 by De Vreyer, Lambert, Safir, Sylla. Sampling: 1750 hhs for 14,450 individuals, spread over 150 clusters drawn randomly from census districts. 57,1% rural, 48% male, 95 % Muslim. Household structure: − Household size: 8 individuals ; 2.4 cells /hh. − Horizontally and vertically extended household: intra and inter-generational. Marie Boltz-Laemmel Savings and Family Solidarity in Senegal 11 / 31

D ATA What do we observe? Savings Indiv. self-reported amount of their actual saving (stock): − Less sharable savings: in formal banks and informal associations, in ROSCAs (“tontines”) − More sharable savings: at home or entrusted to some people Transfers Successful requests reported for the past year (flow): − Out-transfers sent by individuals. − In-transfers received by individuals. − Net out-transfers : out - in transfers Strength of the family pressure − Size of the family network: Number of siblings decomposed into : same parents, same mother/father only and gender (brothers/sisters) − Position in family network: economic status/ education level relative to father (e.g.working in formal sector while father in agri), situation of parents (location, death). Marie Boltz-Laemmel Savings and Family Solidarity in Senegal 12 / 31

D ATA Descriptive statistics on savings Socio-demographic characteristics of savers - savers have more brothers and sisters - they are more likely to be civil servants (7% vs. 2%) - they earn a much higher income (792000 FCFA vs. 338 000FCFA) Savings habits - 56% of HH save, Women are more likely to save than men (32% vs. 17.6%) - Among active adults, savings at home represent 6% of total savings, tontines and saving in formal banks 21%. Table 1 Table 2 Marie Boltz-Laemmel Savings and Family Solidarity in Senegal 13 / 31

D ATA Descriptive statistics on transfers Transfer in general - The vast majority of hhs receive or give transfers (83%) - In total amount, men are the principal transfer senders and women the transfer receivers Out-transfers and kin network - Among transfer senders, 82% have at least send one transfer to the family. - 72% of total value transferred on average are sent to kin members. Table 1 Table 2 Marie Boltz-Laemmel Savings and Family Solidarity in Senegal 14 / 31

E MPIRICAL S TRATEGY Y ih = α 0 + α 1 Sibship ih + α 2 Position ih + α 3 Sibship ih ∗ Position ih + β C ih + v n + ε ih Y ih , outcome for individual i in household h − Savings : total, ratio non-sharable over total savings − Transfers : total out-, regular out-, total net-out transfers Family pressure exerted on i in household h − Sibship ih = Family size : Number of siblings, decomposed between same parents, same mother or father only; brothers & sisters. − Position ih , = Position in the family network : social mobility relative to father · Economic status relative to father: working in formal sector while father in agri, · Education level relative to the father: secondary edu while father no edu. Marie Boltz-Laemmel Savings and Family Solidarity in Senegal 15 / 31