Intrahousehold Effects of Non-Price Credit Rationing

This paper explores inefficiencies that arise when imperfections in rural financial markets are compounded by conflictive family dynamics. The paper refers to the inefficiency that arises when spouses have different "shadow values of capital" as intra household- based inefficiency.

The study uses data from Paraguay to identify households' credit rationing regime and finds that:

• Women are more constrained than men in their credit options;
• 20% of the families experience non-credit rationing;
• In 16% of the families, women reported being unable to meet their demand for capital although their husbands had sufficient access to capital.

The paper proposes a household decision-making model that:

• Provides the theoretical underpinnings for understanding how imperfections in the financial market permeate into families' behaviour;
• Analytically explains how family characteristics lead to decisions that leave one spouse constrained and give rise to intra-household - based inefficiency.

The paper also:

• Examines family responses to constraints in the capital market;
• Uses "game theory" to represent the cooperation and conflicts that govern family dynamics;
• Presents empirical evidence that when women are non-price credit rationed, their families are less efficient.

The paper concludes that:

• This theoretical exercise expanded existing economic models of intra-household decision-making to incorporate rationing mechanisms found in the capital market;
• The "semi-cooperative household" model that it proposes provides a framework to analyze how imperfections in the financial market permeate within the household.