Invisible Economics: How Social Norms Shape Economic Outcomes

Writer: Ananya Gaunekar

Editor: Samarveer Singh

Economic development is primarily judged through tangible factors like infrastructure, per capita income, investment and so on. However, one often tends to overlook the underlying driver of development, which plays a significant role in the shaping of economic decisions – the invisible architecture of social norms. Economist Eliana La Ferrara argues this in her research on the tribes and societies in Ghana, where she tries to identify the extent to which social beliefs influence economic decisions with respect to inheritance, resource allocation and labour and household dynamics. This article aims to explore this theory in practice by looking at a tribal community in India–the Khasis. A predominantly matrilineal tribe, it follows a system where property and power pass through women, unlike the traditional norm of patriliny in the country. The resulting economic and social dynamics offer a compelling counterpoint to the conventional gendered development narratives.

To better understand the premise of this article, we look closely into La Ferrara’s work on the matrilineal societies in Ghana, which offers valuable insights into how deeply entrenched social norms shape economic behaviour. In her study with Annamaria Milazzo, La Ferrara examines the impact of a 1985 legal reform in Ghana that allowed men to bequeath property to their own children, thereby disrupting a customary practice of passing land through the maternal line. The study found that this shift led fathers to reduce their investment in sons’ education, an investment previously meant to be a substitute for the inability to pass land on. 

This behavioural shift highlights a powerful insight: economic decisions are often mediated by the invisible scaffolding of kinship systems and customary norms. When the legal framework shifted, it altered household incentives, revealing how inheritance norms can directly influence human capital formation.

This framework offers a valuable lens for examining the Khasi tribe in India— a matrilineal society where women inherit property and family lineage passes through daughters. Much like the Ghanian tribe, the Khasis challenge conventional assumptions about gender, inheritance and economic power. By comparing these two contexts, we can explore how matriliny influences not just who inherits but how families invest, save and plan for the future. 

The Khasi tribe, indigenous to Meghalaya in Northeast India, presents a unique matrilineal society where lineage and inheritance pass through women. In contrast to the dominant patrilineal norms in India, Khasi women inherit ancestral property and hold central roles in family and social identity. Economically, the region is marked by agrarian livelihoods, small-scale trade and increasing exposure to modernisation and market forces. Despite women’s pivotal role in the economy, men retain authority in political and religious domains. This socio-economic backdrop makes the Khasi community a compelling case for examining how matriliny shapes economic behaviour and development outcomes. 

The comparison becomes even more relevant when considering the recent debates surrounding the Khasi Social Custom of Lineage Bill (1997), which aimed to codify matrilineal norms but inadvertently exposed deep-seated patriarchal tensions. Much like the Ghanian case, the bill triggered fears around identity, property rights and gender roles, especially targeting Khasi women who married outside the tribe. Despite the outward empowerment of women through inheritance, these cases show how shifts in legal and customary frameworks can reconfigure incentives, exposing how development trajectories are deeply intertwined with cultural and gendered norms. 

These cultural systems, often considered peripheral to economic planning, in fact function as core economic institutions that regulate access to resources, structure intergenerational transfers, and shape human capital investment. The cases of the Ghanian tribe and the Khasis in India illuminate how lineage norms directly influence household-level decision-making and aggregate development outcomes. 

In Ghana, the shift in inheritance law altered the intergenerational dynamics of households. Fathers who could now legally bequeath land to their sons no longer needed to invest heavily in education as a substitute form of wealth transfer. This substitution effect reveals that family-level economic choices are not made in isolation from cultural norms but are deeply embedded in them. This has broad implications for development; any reform that shifts property rights, without accounting for existing social institutions, may have unintended consequences for long-term human capital formation and development. 

In Meghalaya, Khasi women formally inherit property, which on the surface suggests a higher level of gender equity in resource access. However, this matrilineal structure has not translated into equivalent economic or political agency. Despite land inheritance rights, men continue to dominate village councils and make household-level financial decisions. According to reports, only 4% of females take part in village council meetings called the ‘Dorbar Shnong’. The above-mentioned bill underscores the tensions: while framed as a means to preserve cultural identity, it effectively restricted women’s autonomy by raising questions about their children’s inheritance rights. Such codification of customs threatens to erode the flexibility of informal norms and impose rigid constraints on women’s economic agency. 

These developments suggest that inheritance systems, whether matrilineal or patrilineal, are not neutral. They allocate capital, determine labour and influence patterns of saving and investment. For instance, in both contexts, parents recalibrate investments in education, health, or property based on which child is likely to inherit or how secure that inheritance is. This has implications for credit access, risk-taking behaviour and labour market outcomes. Where kinship norms are strong, as La Ferrara shows, they even substitute for formal credit markets, creating informal systems of enforcement and reciprocity that carry both advantages and constraints.  

In policy terms, this points to the need for development frameworks that do not treat households as unitary decision-making units but as sites of negotiation structured by social norms. Legal reforms around land, marriage or inheritance must be designed with a deeper understanding of how these institutions affect intra-household economics. Without this lens, reforms may fail to deliver equitable outcomes. Ultimately, the economic development of any society cannot be disentangled from its social fabric. As the Khasi and Ghanaian examples demonstrate, development policy must move beyond surface-level indicators and engage with the invisible but powerful architecture of kinship, gender and cultural norms that shape economic life at its roots.