Do Informal Transfers Induce Lower Efforts? Evidence from Lab-in-the-Field Experiments in Rural Mexico

Abstract

How do informal transfers affect work incentives? The question matters in developing countries, where labor markets are intertwined with transfer networks. The tax-and-subsidy component of transfers would dilute work incentives, but their pro-social element could encourage people to work harder. Such crosscurrents are hard to disentangle because participation in informal networks is likely endogenous. We tackle this problem with a lab-in-the-field experiment that uses a real-effort task. Our main finding is that participants do not reduce their effort in the presence of transfers. This suggests that the impact of informal transfers may extend beyond just the sharing of risk.

The Fetters of the SIB: An Experimental Study in Burkina Faso

“…In natural business environments, it can be difficult to hide income from the kin network as many small-to medium-sized businesses in developing countries are also family businesses. Thus, another channel through which kin networks might dampen entrepreneurial activity could be that individual work effort is negatively affected by the prospect of sharing norms (Alger et al, 2020;Grimm et al, 2013). Our study adds to this literature by presenting the results from a field experiment with tailors in Burkina Faso, who were financially incentivized to work on a real effort task, similar to their regular business activity, within one day.…”

Do Women Contribute More Effort than Men to a Real Public Good?

“…Our work is motivated by the experimental literature on gender differences in economic experiments. 1 To measure the subjects' real effort contributions towards a real public good that they could not benefit from themselves, we conducted a lab-in-the-field experiment which builds on a recently developed design (Alger et al, 2019). Subjects were given the opportunity to complete levels in a simple but boring task: marking the outline of pre-printed squares with a pencil on a sheet of paper.…”

“…A variety of real effort tasks have been used in the literature, such as solving anagrams(Charness and Villeval, 2009), stuffing envelopes(Carpenter et al, 2010), counting zeros(Abeler et al, 2011), moving sliders (Gill and Prowse, 2012), and threading nuts onto bolts(Alger et al, 2019). We chose a manual task that did not require the use of computers.…”