Is Informal Redistribution Costly? Evidence from a Lab-in-the-Field Experiment in Senegal

In Sub-Saharan Africa, individuals frequently transfer a substantial share of their resources to members of their social networks. Social pressure to redistribute, however, can induce disincentive effects on resource allocation decisions. This paper measures and characterizes the costs of redistributive pressure by estimating individuals' willingness to pay (WTP) to hide their income. The study estimates a social tax due to informal redistribution of 10 percent. Moreover, it shows that individuals are willing to escape from the redistributive pressure exerted mainly by extended family members.