Family Ties and Socio-Economic Outcomes in High vs Low Income Countries

ABSTRACT

Alesina and Giuliano illustrate that strong family ties lead to lower geographical mobility and reduced labour force participation of young and female individuals. We extend their analysis by arguing that the effect of strong family ties on economic outcomes depends on a country’s level of economic and institutional development. This cross-country heterogeneity arises because strong family ties not only foster traditional family values (which have disruptive effects on economic outcomes), but also provide economically valuable social networks – especially in societies characterised by weak institutions and limited market access. Empirical evidence using the European and World Value Surveys (EVS/WVS) are supportive of our theoretical argument.

Acknowledgements

The authors are grateful to Alberto Alesina and Paola Giuliano for access to their data and stata code, and thank Bruno Heyndels, Joshua Holm, Marc Jegers, Pierre-Guillaume Méon, Paolo Pinotti and an anonymous referee for insightful comments and suggestions. Financial support from FWO Vlaanderen (grant number G.0022.12) is also gratefully acknowledged. Data and code are available upon request.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. A similar network mechanism has also been brought forward to explain the formation and success of political dynasties (Dal Bó, Dal Bó, & Snyder, 2009; Daniele, 2015). Likewise, Mastrobuoni (2015) convincingly documents the economic value of network connections within the Italian-American mafia in the 1960s.

2. A large literature links interpersonal trust to economic growth and development. For a recent discussion of this extensive literature and an integrative contribution to it, see Bjørnskov and Méon (2013).

3. Specifically, the first question asks ‘How important is family in your life?’ and takes values from 1 (not important at all) to 4 (very important). The second question measures respondents’ agreement with one of two statements: (1) ‘One does not have the duty to respect and love parents who have not earned it’; (2) ‘Regardless of what the qualities and faults of one’s parents are, one must always love and respect them’. The third and final question again measures respondents’ agreement with one of two statements: (1) ‘Parents have a life of their own and should not be asked to sacrifice their own wellbeing for the sake of their children’; (2) ‘It is the parents’ duty to do their best for their children even at the expense of their own wellbeing’.

4. The eigenvalue of the first factor deriving from this PCA is equal to 1.24, and it explains 41.9 per cent of the variance in responses. The factor loadings for each element included in the PCA exceeds 0.53.

5. For more information on this classification, see http://data.worldbank.org/about/country-classifications/a-short-history. Note also that while we report only the split-sample results in detail below, models with interaction effects provide similar results. For ease of interpretation, Figure A1 in the Online Appendix visualises the marginal effect of family ties across the different country groups in these interaction models, which are estimated using multilevel models – where individuals (level 1) are nested within countries (level 2) and the family ties variable is interacted with the World Bank classification index (details available upon request).

6. Our results do not change if we use logit or probit models instead of OLS (available upon request).

7. The slight difference in our results is due to our specification of respondents’ marital status. Alesina and Giuliano set the indicator variable for married individuals to 1 only for individuals declaring to be ‘living together as married (but not married)’, while we also set it to 1 for married individuals. Although this does not affect any of the results reported below, and we can exactly replicate Alesina and Giuliano’s original results using their specification, we consider our operationalisation more appropriate.

8. Magruder (2010) studies formal labour markets, and it is not intuitively clear whether similar gender differences in the labour market advantage of family networks would likewise arise in informal labour markets. Unfortunately, the EVS/WVS does not differentiate between formal and informal labour markets, which implies that we cannot empirically verify such potential formal–informal sector differences. This clearly remains an important avenue for future research.

9. Also in this case, we refer to Alesina and Giuliano (2011) for detailed tests of the direction of causality.

10. Interestingly, recent work has started taking limited steps towards such a line of research. Brumm and Brumm (2014), for instance, show that intra-family altruism might hinder economic reforms even in periods of economic crisis, while Alesina et al. (2015) model a game where societies characterised by strong family ties vote for stricter labour market regulation.