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Using village data from Tanzania, the authors test whether gifts and loans between households are voluntary while correcting for misreporting by the giving and receiving households. Two maintained assumptions underlie the analysis: answers to a question on which people would turn to for help are good proxies for willingness to link; and, conditional on regressors, the probability of reporting a gift or loan is independent between giving and receiving households. Building on these assumptions, they develop a new estimation methodology that corrects for response bias. The testing strategy is based on the idea that, if lending and gift giving are voluntary, then both households should want to rely on each other for help.
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