Learning and Synergy in Social Networks: Productivity Impacts of Informal Labor Sharing Arrangements

We study the effects of informal labor sharing arrangements and other social interactions on farmers' productivity in a developing country context, testing whether these types of social and work interactions lead to productivity gains through learning, synergy, or both. Using a rich panel data set of Ethiopian subsistence farmers, we estimate a distance function of grains production and find large productivity gains (approximately 20 percent) from labor sharing due to synergy effects that boost labor productivity. Some training experiences, such as extension education programs and performing off-farm work, lead to learning that increases the farmers' productivity. However, labor sharing does not lead to learning as the productivity gains observed in years with labor sharing disappear in following years if the farmers do not continue to employ labor sharing. The results suggest that interaction and observation alone is not enough to produce learning that leads to productivity gains; however, training and educational activities such as extension programs and off-farm work do appear capable of producing learning and associated productivity gains.