Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/267480 
Year of Publication: 
2022
Series/Report no.: 
IZA Discussion Papers No. 15743
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
In low-income communities in both rich and poor countries, redistributive transfers within kin and social networks are frequent. Such arrangements may distort labor supply—acting as a "social tax" that dampens the incentive to work. We document that across countries, from Cote d'Ivoire to the United States, social groups that undertake more interpersonal transfers work fewer hours. Using a field experiment, we enable piece-rate factory workers in Côte d'Ivoire to shield income using blocked savings accounts over 3-9 months. Workers may only deposit earnings increases, relative to baseline, mitigating income effects on labor supply. We vary whether the offered account is private or known to the worker's network, altering the likelihood of transfer requests against saved income. When accounts are private, take-up is substantively higher (60% vs. 14%). Offering private accounts sharply increases labor supply— raising work attendance by 10% and earnings by 11%. Outgoing transfers do not decline, indicating no loss in redistribution. Our estimates imply a 9-14% social tax rate. The welfare benefits of informal redistribution may come at a cost, depressing labor supply and productivity.
Subjects: 
kin tax
informal insurance
illiquid savings
transfers
labor supply
JEL: 
J22
J24
H24
D61
O12
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.