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

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  • Munir Squires

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.

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  • Munir Squires, 2024. "Kinship Taxation as an Impediment to Growth: Experimental Evidence from Kenyan Microenterprises," The Economic Journal, Royal Economic Society, vol. 134(662), pages 2558-2579.
    • Handle: RePEc:oup:econjl:v:134:y:2024:i:662:p:2558-2579.
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    File URL: http://hdl.handle.net/10.1093/ej/ueae025
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