Speaker
Description
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 labour exchange groups, 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 home production. Using data from north-west Tanzania, we confirm the model's predictions: Women who are part of a labour exchange team are more likely to obtain paid farm work, and are more often hired for tasks for which teams have a comparative advantage.
