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Informal Labor Exchange Teams and Participation in the Labor Market: Evidence from Rural Tanzania

Author

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  • Arciniegas, Christian

    (University of Freiburg)

  • Dumas, Christelle

    (University of Freiburg)

  • Fahn, Matthias

    (University of Hong Kong)

Abstract

We investigate labor exchange teams in rural communities, which are prevalent in many developing countries. We show theoretically that these teams are beneficial to employers, who can outsource the monitoring of workers. Team members are incentivized to exert high effort because any deviation would lead to the dissolution of their production team. Data from Tanzania support the model's predictions: members of labor exchange teams are more likely to obtain paid work and are often hired to perform tasks for which monitoring is costly. Consequently, this informal arrangement helps reduce moral hazard in the context of employment relationships.

Suggested Citation

  • Arciniegas, Christian & Dumas, Christelle & Fahn, Matthias, 2025. "Informal Labor Exchange Teams and Participation in the Labor Market: Evidence from Rural Tanzania," IZA Discussion Papers 17852, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp17852
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    More about this item

    Keywords

    information asymmetries; labor market; labor exchange; relational contracts; Tanzania;
    All these keywords.

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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