“Informal labor exchange teams and participation on the labor market : Evidence from rural Tanzania”
joint with Christian Arciniegas and Matthias Fahn

Abstract :
Development economists have long studied how informal arrangements among community members may substitute for an imperfect and incomplete market. This paper assesses whether informal arrangements may actually promote exchanges in the market. We study rural labor exchange teams, an organization that is found in many different areas but still underdocumented in the economic literature. Our theoretical analysis shows that these teams offer an advantage to employers, who may outsource the monitoring of workers’ effort to the team. Team members are incentivized to provide high effort because a deviation would lead to the team dissolution, including for own farm production. Data from north-west Tanzania is consistent with the model’s predictions : women who are part of a labor exchange team are more likely to obtain paid farm work, and are more often hired for tasks for which teams have a comparative advantage.