Oct 1, 2014 Report No：14-17
Hide and Seek: A Theory of Efficient Income Hiding within the Household
In many countries, spouses routinely hide income, consumption and assets from one another. In this paper, I provide a theoretical model in which hiding is costly and only some expenditure can be hidden. I characterise the set of ex ante Pareto efficient allocations and show by means of extended examples that in some cases it can be efficient for one or both partners to lie about their income. Examples also show that efficient hiding may not be a marker of power or weakness in the household decision-making process. As such, it may not be possible to make meaningful inference about the nature of the household simply by observing whether assets or income are hidden.
|Keywords||efficient household; hiding income; family; couples|