The Social Tax: Redistributive Pressure and Labor Supply

Research Question

This paper asks whether informal redistributive pressure — the social obligation to share earned income with kin and social networks — distorts labor supply in low-income communities. The authors conceptualize such pressure as a “social tax” on earnings and develop the first direct causal test of whether it reduces labor supply, output, and earnings among full-time workers.

Setting and Sample

The study works with 474 full-time piece-rate factory workers (464 of whom are women) employed in cashew processing plants run by Olam in Côte d’Ivoire. Workers are paid biweekly in cash entirely through piece rates for individual nut-peeling output, creating a direct mapping between labor supply and income. At baseline, workers report transferring 25–35% of their income to individuals outside their household, with 77% having made at least one transfer in the previous 3 months. Workers also strongly believe that earning more triggers more transfer requests: 77% agree that if someone starts earning more by working harder, people will ask that person more often for financial help.

Florian Grosset-Touba | Macro Paper Warehouse

The Social Tax: Redistributive Pressure and Labor Supply