Consumption and Investment in Resource Pooling Family Networks

This article examines a novel motive for resource pooling in family networks in rural economies: to relax credit constraints and facilitate investment in non-collateraliseable assets for which credit market imperfections are most binding. We thus complement established literatures examining risk-sharing motives for resource transfers within family networks, as well as motives based on kinship tax obligations. We do so exploiting the Progresa programme data, in which family networks can be identified, households are subject to large exogenous resource inflows, and detailed responses on consumption and an array of investments can be tracked in a household panel over five years.