Kinship Taxation as an Impediment to Growth: Experimental Evidence from Kenyan Microenterprises

Working Paper
Published on 7 July 2021
Authors
Munir Squires

A previous version of this paper was published 13 January 2016.

Abstract

This paper documents strong pressure on productive entrepreneurs in a developing country setting to share their income. This ‘kinship tax’ can distort productive decisions, including investment. I conduct a lab experiment with a sample of 1805 Kenyans to quantify the importance of this tax. In my sample, one in three men men and one in five women face distortionary pressure to share income. Strikingly, this share is strongly increasing in ability, suggesting potentially large aggregate production consequences. Male entrepreneurs who receive cash grants expand their business only if they do not face distortionary kinship taxation as measured in the lab.

Authors

Munir Squires

University of British Columbia