Giving to the Family Versus Giving to the Community: Private Transfer Networks In Indonesia

Indiana University, Bloomington IN

Investigators

Abstract

Understanding what leads individuals to transfer resources to others, outside one's own family is fundamental issue within economics, and other social sciences. This planning grant pursues research that investigates two related questions using a new longitudinal household survey from Indonesia. First, what is the relationship between transfers to family members, and transfers to community organizations? Second, are there intergenerational linkages between transfers to family, and transfers to community institutions? The theoretical approach used in this project models the individual's decision to participate in a transfer network within the context of an overall utility-maximizing strategy. Family and community networks can provide important economic benefits such as insurance and credit, mutual labor exchange, as well as non-economic benefits such as caring, social status and group membership. An individual will choose to participate in a given network when the expected benefits outweigh the expected costs. The results from this research can inform important policy debates. Understanding which individuals and communities lack access to formal and informal mechanisms for consumption-smoothing, risk sharing and organizing economic production may improve the ability to target vulnerable groups within poverty alleviation programs. In addition, identifying the relationship between family and community networks can improve the effectiveness of public policy towards community organizations, so as to avoid unintended crowding out effects. If family networks and community-level networks are close substitutes, then the expansion of community organizations may displace family-level mechanisms for providing credit, insurance and mutual labor exchange.