Family and Kinship Ties in Development An strongEconomiststrong’s.pdfVIP

Family and Kinship Ties in Development: An Economist’s Perspective ∗ Eliana La Ferrara Bocconi University, IGIER September 2007 Abstract This paper examines the role o family and kinship ties in economic development. It analyzes the functions that families play in transmitting values to younger generations and in establishing social norms that have a profound impact on individual decisions involving fertility, labor force participation, investments in education and health. It also discusses the role of families as substitutes for markets, with particular reference to informal insurance and credit markets. A common theme in the paper is to highlight the “comparative advantage” that families or kin groups have in performing some of these roles, but also the potential inefficiencies that may result from their involvement. Paper prepared for the Fifth AFD/EUDN Conference “Does Culture Matter for Development?” Paris, December 5th, 2007 ∗ Contact information: Eliana La Ferrara, IGIER Università Bocconi, via Sarfatti 25, 20136 Milan, Italy. E-mail: eliana.laferrara@unibocconi.it 1. Introduction The role of family and ethnic ties varies considerably across societies. Some countries have relatively small and cohesive nuclear families (e.g., Italy, Spain); others have a comparably small but more “independent” organization (e.g., Scandinavian countries), other still have very big extended families with a pervasive role (e.g., most of Africa, Asia and Latina America). Why family structures have evolved in such a different way is a fascinating question which goes beyond the scope of the present paper. This paper will focus on the economic effects of different family structures, and in particular on the extent to which societies with more extended (or stronger)