Description:

Speaker: Thu Tran

Title: Negative Shocks and Hidden Money on the Household

Abstract: This project seeks to answer the question: How does income hiding by household members respond to the expectation of negative shocks? I aim to show that when the household bargaining rule allocates less marginal resources to a member during tougher times, they are more likely to hide money in anticipation of negative shocks. This insight connects hiding behaviors to intra-household risk-sharing. Risk-sharing efficiency requires household bargaining to favor more risk-aversed members during economic hardship. Therefore, if a risk-aversed family member hides money in response to negative shocks, there might exist inefficiencies in intra-household risk sharing. In such cases, bargaining does not adequately support household members most worried about risks, so they resort to hiding as a coping strategy.