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

Christian Arciniegas (), Christelle Dumas () and Matthias Fahn ()
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Christian Arciniegas: University of Freiburg
Christelle Dumas: University of Freiburg
Matthias Fahn: University of Hong Kong

No 17852, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: information asymmetries; labor market; labor exchange; relational contracts; Tanzania (search for similar items in EconPapers)
JEL-codes: D86 J43 J46 L14 (search for similar items in EconPapers)
Date: 2025-04
New Economics Papers: this item is included in nep-iue and nep-lma
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