Gender relations complicate how people manage their money.

In Economics 101, we are taught that men and women are perfectly rational. Everyone is profit maximizing. If families are added to the mix, the husband and wife jointly maximize family income. If there are children to be taken care of, or there is food to be cooked or housework to be done, then the value of children or cooking or housecleaning is given an implicit economic value. Supposedly, husbands and wives mutually work out how to get the maximal amount of cash plus unpaid domestic services. In the old theory (written in the days when sexism ran rampant), men earned more money in the market place because they were more productive due to men’s higher levels of education and experience. Women did domestic work because they were good at it, so they provide more non-market value than do men.

The quality of explanations of gendered economic inequality has improved with the onset of feminist scholarship. New thinking emphasizes the role of labor market discrimination in excluding women from jobs or lowering their market wages.

Either way, whether the discussion is feminist or not-at-all feminist, women and men engage in joint decision making – possibly with the man having more power than the woman.

Furthermore, once the woman is in the labor force and the balance of her domestic versus market duties has been established, the woman thinks and acts just like a man. If she has a business, she manages that business the same way a man would. If she makes investment decisions, she makes them the same way a man would. The only difference between the woman and her husband is that she might choose to put more hours in domestic labor. Except for that, her investment, savings and monetary decisions are identical to that of men in general, and her husband in particular. It does not matter if she talks to her husband about money or does not talk to her husband about money. They would both make the same decision because they both are “fully rational”.

There is now a body of literature from scholars of gender and development who work on Sub-Saharan Africa that seriously challenges all of this. Gender relations are extremely diverse in Africa between religious groups, between regions and between ethnic groups within regions. However, one pattern that is particularly common in West Africa (although it exists elsewhere), is women dominating retail trade in traditional bazaars. Public spaces with stalls for selling produce or spices or grains or clothing tend to be reserved for the exclusive use of female traders. The women who run these stalls often earn substantial amounts of money. This tradition of female entrepreneurship has extended in the modern era to high levels of women participating in microenterprise. The West African case not only allows for the observation of how married women handle their domestic monies but how they run their businesses as investors and entrepreneurs.

Now here is the really interesting part.

West African husbands and wives DO NOT share financial information with each other. There is almost no joint financial decision making whatsoever. The husband has his job and his money; the wife has her job and her money. How much each of them is making and what they spend their money on is semi-secret. Generally, there is a rough division of labor as to who pays what. (A not uncommon division is that the woman pays everyday household expenses, while the man pays for big ticket items like a car or annual school fees.) But neither spouse knows exactly how much money their partner is making; each spouse is also trying to reserve as much money as possible for their own personal use – and get their partner to pick up as much as possible of the household expenses.

You can think of West African family financial regimes as household decision making under conditions of significant mutual distrust. The couple may love each other and may vastly enjoy each other’s company. But on monetary matters, the husband and wife are two players in a game. Both partners handle their money strategically – concealing as much of their money as possible while extracting as much as they can from the other.

You can see that the old economic models erred in not allowing for levels of trust and distrust in marriages. The economists assumed full mutual access to information, cooperation between the spouses and no strategic interaction of spouses on their own account. The West African case illustrates what can happen when levels of distrust are high.

Levels of distrust can also be high in American marriages that are deteriorating or in which one party is viewed as being financially irresponsible.

The material below comes from a wonderful study by Sophia Friedson-Ridenour and Rachael Pierotti in the 2019 World Development. “Competing Priorities: Women’s Microenterprises and Household Relationships.” (Volume 121: pp. 53-62). Their primary material comes from an extensive series of interviews they did with women entrepreneurs in Ghana – a country particularly known for its high level of female participation in trading and small business. However, they also review the findings from an extensive literature on women’s household cash management strategies throughout Africa. (These had less material on women’s management of their microenterprise cash.) Because there is broad parallelism between Friedson-Ridenour and Pierotti’s Ghanaian findings on family+microenterprise and those of other researchers who studied family alone in other settings, I discuss all of the findings together regardless of who exactly discovered what.

So what do we know about Sub-Saharan women handling their household and business monies under conditions of marital distrust?

1. It is essential for women to maintain control of household economic resources. Women who lost control of their household economic resources lost control over how that money is spent.

2. Women will forego economic opportunities that risk revealing to their husbands exactly how much money they are making. Their unwillingness to “make extra profit” is not due to any economic irrationality or poor business judgment on their part. The money they keep secret they get to keep. The money they earn openly can be expropriated by their husbands.

3. Women microentrepreneurs invest less in their businesses than do male microentrepreneurs. This leads to lower rates of profitability and smaller overall firm size. There are many reasons for this.

4. Some women microentrepreneurs invest their profits in their husband’s firm rather their own. The favor is not returned by the men. Women firm owners who do NOT have husbands running their own firms tend to have more successful businesses than do women in two-firm families.

5. Marriages typically designate particular family expenses as being uniquely male or uniquely female. One common pattern is men paying for big ticket items while women pay for daily household operation, but many other variations are possible. Concealment of income is most relevant for idiosyncratic expenses that have not been pre-coded as being male or female. This produces strategic bargaining as to who is going to have to pick up the unassigned tab. Pleading poverty is helpful in getting the other spouse to pay unassigned expenses. This is a disincentive for both genders to have conspicuously successful businesses.

6. Women have to save money independent of what might be needed for their businesses to cover for surprise expenses left uncovered by their husbands. There could be an unexpected bill that the husband refuses to pay. The husband could experience misfortune and be unable to pay his share of the expenses. Alternatively, the marriage could deteriorate and the husband could leave. All of these eventualities require women keeping cash reserves that are not tied up in the illiquid assets of a business. Note that Ghanaian women microentrepreneurs had nontrivial access to commercial banking. Women in settings with less access to banks would have faced challenges protecting their safety reserve from discovery or theft. Financial security may entail investing in a non-commercial enduring asset such as a house.

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The West African data suggest investment behavior by women that is significantly “worse” from the point of view of building their businesses than those decisions made by men. This is not because women are not economically serious – or that they are dividing their time between work and children. Rather they were in relationships of mutual economic distrust. Strategic bargaining over money issues within families often leads to outcomes that are less than ideal for the husband, for the wife and for the couple as a whole. This applies even in marriages where on every other issue except money there is marital harmony and bliss.

Friedson-Ridenour and Pierotti have substantially advanced the study of women’s economic behavior by showing the relationship between bargaining within a marriage and women’s independent economic decision making. When women make decisions based on familial considerations, it is not necessarily a mark of economic irrationality. Social scientists (and in particular male social scientists), need to think more carefully about the economic consequences of the exact bargains that men and women in relationships negotiate among themselves.