Public Good Provision and Communication in the Household.

Abstract: In first-hand data from Cameroon, we observe that household members often make collective decisions about public goods, while at the same time hiding income to each other. The theoretical literature on intra-household decision does not give any prediction of why this should happen. To fill this gap, we study how intra-household allocations are affected when we relax the hypothesis of symmetric information among spouses: we assume that the spouses do not completely observe the income realization of their partner, allowing the possibility of hiding part of one’s income. When both spouses contribute to the public good and can make transfers to each other, a partition equilibrium arises: they reveal partially their income realization, such as to make their preferred contribution incentive compatible. However, hiding occurs in order to be able to reduce the amount of free-riding of the other spouse.