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

Christian Arciniegas, Christelle Dumas and Matthias Fahn

No 11809, CESifo Working Paper Series from CESifo

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 a high level of 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: relational contracts; labor exchange; labor market; information asymmetries; Tanzania. (search for similar items in EconPapers)
JEL-codes: D86 J43 J46 L14 (search for similar items in EconPapers)
Date: 2025
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