Standard models of the family assume that spouses share information. In this paper, we challenge this assumption with theory and evidence. We field a new survey module in the Dutch LISS panel where spouses independently report their knowledge of each other's finances.
Private information is pervasive: in 40 percent of couples, at least one partner lacks full knowledge of the other's income. We examine the implications of private information for intrahousehold risk sharing using a mechanism design approach. Our model predicts that a spouse's consumption share rises with their income share when information frictions are present but is independent of income under full information.
Constrained-efficient allocations can be sustained without full revelation: each spouse chooses how much money to bring home, and hidden income is never revealed. Evidence from the LISS panel confirms the predictions: a positive relationship between income and consumption shares appears only among imperfectly informed couples. Controlling for limited commitment does not affect this result, suggesting that information asymmetries—rather than commitment frictions—drive departures from full insurance.
About the speaker
Matthias Doepke is a Professor at the Department of Economic History at LSE, and affiliated with CEPR, CESifo, etc. He is macroeconomist and his research is mostly on topics related to family economics, growth and development. Matthias’s research has appeared in the JPE, AER, AEJ: Macroeconomics, JPubE, QJE, RES, Econometrica, etc., and several Handbook chapters.
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