When social networks generate redistributive pressures, labor supply decisions are undertaken in a social context. Individuals who optimize labor supply do so with the understanding that some of their earnings may be subject to taxation within the network; if they are capable of avoiding this tax by not working, then labor supply will be distorted downwards. If the unemployed exert greater redistributive pressure, then this insight leads to the theoretical possibility of multiple equilibria in networks: networks may be characterized by equilibria where few work and where the incentives to work are poor, or alternatively by equilibria where many works and the incentives to work are high (Hoff and Sen 2011). While experimental evidence indicates the importance of redistributive pressure exists for windfall gains (e.g. Jakiela and Ozier 2015) little is known about whether these pressures generate unemployment in practice. It may be considered that this channel is particularly important for women, both as formal labor supply may be more elastic and as women may face particularly high redistributive pressures (Jakiela and Ozier 2015 find that women are particularly averse to investing windfall gains when information about investment performance is known to their kin).
This study examines whether multiple employment equilibria exist in redistributive networks in Côte d’Ivoire using two experiments: a lab-in-the-field meant to isolate mechanisms, and a hiring experiment using a large local firm meant to demonstrate the real-world importance of the mechanism. Both experiments share some common components: in both cases, it begins by randomly sampling individuals and identifying the network connections that exert the most redistributive pressure on them (the redistributive sub-network).
The project then randomizes the saturation of job offers within the redistributive sub-networks. The nature of these jobs will be different between the two exercises: in the lab-in-the-field, the research team will ask them to complete a piece-rate small-scale manufacturing task. In the hiring experiment, the study offers actual positions at a local cashew-nut processing factory. If redistributive pressure is leading to multiple equilibria, they anticipate that saturating a network with positions will lead to greater take-up of our job opportunities (and greater labor supply on the intensive margin). The project will additionally draw a sample and test to see whether there are gender differences in the responsiveness of network saturation of job offers.
Other mechanisms may also contribute to greater take-up of joint offers (with similar multiple equilibria in labor supply). For example, network complementarities in the return to leisure, or in commuting may be relevant. In the lab-in-the-field, they can provide direct evidence on whether redistributive pressures or whether other network complementarities contribute to the saturation effect. More particularly, the project randomly varies the public nature of the piece-rate task. Individuals will be able to complete the piece-rate task in private within their own home, and it randomizes whether the network is informed about this task. It anticipates that private information reduces the threat of redistributive pressures, and therefore if these channels are important, the study expects that there is less of a saturation effect when tasks are private.
Between these two experiments, this project anticipates that it will be able to directly test for whether redistributive pressure generates multiple equilibria in labor supply, and whether there are gender differences in the expression of these patterns.