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Does Distance-Driven Information Asymmetry Affect Private Income Transfers? Theory and Evidence From Colombia

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  • Carolina Alban Conto

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, DIAL - Développement, institutions et analyses de long terme)

Abstract

This paper investigates to what extent the distance between donors and receivers influences the responsiveness of private transfers to positive income shocks. First, I provide an original conceptual analysis that incorporates the notion that information asymmetry increases with distance and encourages donors and receivers to act strategically. Next, using evaluation data from a conditional cash transfer program in Colombia, \textit{Familias en Acción}, and implementing a difference-in-difference strategy, I test the main predictions of the underlying theoretical framework. The estimates support the idea that benefiting from a government subsidy affects transfer decisions when donors and receivers live geographically close to each other. This finding challenges the existing literature on the topic by showing that, ignoring information asymmetry can lead to erroneous interpretations of transfer-income derivatives and crowding-out effects.

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  • Carolina Alban Conto, 2021. "Does Distance-Driven Information Asymmetry Affect Private Income Transfers? Theory and Evidence From Colombia," Working Papers hal-03192955, HAL.
    • Handle: RePEc:hal:wpaper:hal-03192955
    Note: View the original document on HAL open archive server: https://hal.science/hal-03192955
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