The Social Tax: Redistributive Pressure and Labor Supply

Arbeitspapier

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.

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• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: IZA Discussion Papers ; No. 15743

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Time Allocation and Labor Supply ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes ; Allocative Efficiency; Cost-Benefit Analysis ; Microeconomic Analyses of Economic Development
• Thema: kin tax ; informal insurance ; illiquid savings ; transfers ; labor supply

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Carranza, Eliana ; Donald, Aletheia ; Grosset, Florian ; Kaur, Supreet
• Ereignis: Veröffentlichung
• (wer): Institute of Labor Economics (IZA)
• (wo): Bonn
• (wann): 2022

Weitere Informationen

• Handle: http://hdl.handle.net/10419/267480