Kinship Taxation as an Impediment to Growth: Experimental Evidence from Kenyan Microenterprises

Author:

Squires Munir1

Affiliation:

1. University of British Columbia , Canada

Abstract

Abstract This paper documents strong pressure to share income faced by entrepreneurs in a developing country setting. This ‘kinship tax’ can distort productive decisions, including investment. A lab experiment with 361 Kenyan entrepreneurs reveals that a third of them face distortionary pressure to share income. This kinship tax is higher for men, and increasing in entrepreneurial ability. Using a pre-existing randomised cash transfer experiment, I find that only male entrepreneurs who do not face distortionary kinship taxation invest these transfers. Imposing some parametric assumptions, I estimate that kinship taxation decreases aggregate productivity among firms in this sample by one-quarter.

Publisher

Oxford University Press (OUP)

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