Motives For Household Private Transfers In Rural Burkina Faso

This paper explores the motives for inter-household private transfers in rural Burkina Faso. Given the importance of private transfers in household income, quantitatively evaluating the response of private transfers to recipient incomes is informative for the design and the implementation of public interventions, such as policy alleviation programs, which often include transfer programs. To the extent that private transfers interact with public ones, the overall impact of public transfers might be offset, leaving income distribution unchanged. I use the transfers model proposed by Cox, and two national surveys from Burkina to test whether private transfers are motivated by altruism, exchanges or by risk sharing objectives. The econometric estimations control for income endogeneity via instrumental variables, and use three alternative specifications: a spline regression, which is standard in the literature, a friction model which controls for the large fraction of non-participants, and a partial linear model which relaxes the functional form assumption between transfers and income. The findings support the equalizing effects of private transfers. Furthermore, transfers received are reduced by pre-transfers incomes and the effect is larger for low income households. These results support altruistic motives for transfers. In the highest quartile, exchanges motives seem to prevail as indicated by the semi-parametric explorations. Transfers are also used to cope with income risk, although the response to transitory income shocks is relatively small. Overall, the findings provide evidence on the interactions between private and public transfers, which may limit the net effects of public interventions which use transfers to pursue income equality objectives.