When social networks generate redistributive pressures, labor supply decisions are undertaken in a social context. Individuals who optimized labor supply did so with the understanding that some of their earnings could be subject to informal taxation within the network. If individuals were able to avoid this tax by not working, labor supply was distorted downward. When the unemployed exerted greater redistributive pressure, this mechanism implied the theoretical possibility of multiple equilibria within networks: networks could be characterized by equilibria in which few individuals worked and incentives to work were weak, or alternatively by equilibria in which many individuals worked and incentives were strong (Hoff and Sen 2011). While experimental evidence had demonstrated the importance of redistributive pressure for windfall gains (e.g. Jakiela and Ozier 2015), little was known about whether these pressures generated unemployment in practice. This channel was expected to be particularly relevant for women, as formal labor supply tended to be more elastic and women often faced higher redistributive pressures. Indeed, Jakiela and Ozier (2015) found that women were particularly averse to investing windfall gains when information about investment performance was known to their kin.
This study examined whether multiple employment equilibria existed within redistributive networks in Côte d’Ivoire using two experiments: a lab-in-the-field experiment designed to isolate underlying mechanisms, and a hiring experiment conducted with a large local firm to assess real-world relevance. In both experiments, the study began by randomly sampling individuals and identifying the network connections exerting the greatest redistributive pressure on them (the redistributive sub-network).
The project then randomized the saturation of job offers within these redistributive sub-networks. Job characteristics differed across the two settings. In the lab-in-the-field experiment, participants completed a piece-rate small-scale manufacturing task. In the hiring experiment, the study offered actual employment positions at a local cashew-nut processing factory. Consistent with predictions from models of multiple equilibria, increasing the saturation of job offers within networks led to higher job take-up and greater labor supply on the intensive margin. The study also tested for gender differences in responsiveness to network-level job saturation.
The project further explored alternative mechanisms that could generate similar patterns in labor supply, such as complementarities in leisure or commuting. In the lab-in-the-field experiment, the design allowed for direct testing of whether redistributive pressures or other network complementarities drove the observed saturation effects. Specifically, the study randomly varied the public nature of the piece-rate task. Participants completed the task privately within their homes, and the experiment randomized whether network members were informed about participation. Consistent with redistributive pressure mechanisms, private information reduced the saturation effect, indicating that public observability amplified labor supply disincentives.
Taken together, the completed experiments provided direct evidence that redistributive pressure can generate multiple equilibria in labor supply and contribute to unemployment traps within social networks. The findings also revealed meaningful gender differences in these dynamics, underscoring the importance of network-based externalities in shaping women’s labor market outcomes.