 Hello again, I will present this study with Stefani Romero in which what we do is to try to understand what is the role of beliefs in this election between an informal and a formal labor market. So I think that my co-authors and colleagues have already discussed a lot about this difference between the formal and the informal labor market, but something I want to remark is these two prevailing hypotheses on why labor informal and formal labor markets coexist. And basically these hypotheses can be reduced to an ideal and exclusion, and if what is happening here is exclusion, then actually the market labor failures are driving people out of the market. But on the other hand, we can also think on the exit mechanism and in the exit mechanism what happens is that people are selecting their optimal degree of interaction with the state and for informal workers usually their optimal interaction with the state is quite low. So this is where we want to continue with this paper and then if you ask me what can we tell with an experiment about this, let me tell you three arguments about it. So first of all, if I create labor markets within a laboratory, I can block assortative problems. And what are these type of problems that usually in the real labor markets there are some differences in productivity between the two markets. There are a lot of differences between people in both markets. Second, in this particular case I can just create the same type of task to be played in the two markets. So this is one second reason for an experiment. And the third one is that given that we parametrize each market, we have a better understanding on what would be the accurate valuation of being in one or in the other. So our main argument in this study is that market selection has some elements of a coordination problem. And why is that? Believes my matter. To which extent believes matter? Because when people can opt for going to the formal or the informal labor market, there are some social norms that may reinforce that it is okay to not pay taxes or that it is okay to be your own boss and that you don't want to have like this informal type of jobs. So this is what we aim to tackle here and what we designed was a decision setting incentivized in which participants selected where do they want to perform their task. So if you see whereas in the case of for presentation, we assume that they were excluded to the market if they lost this tournament, here is by choice that they can just go to one or to the other market. So here what we have is like a primary market like representing this formal market in which we have a higher wage but is also heavily taxed. Whereas we have a secondary market with lower wages but no taxes and the point here when we model the decisions of people is that regardless of which market you choose, you will be part of the social welfare benefits. It's just that those in the formal market would receive these benefits at a higher rate that those outside this formal labor market. So this is the main setting. All the participants played under this setting but actually the question of interest and where is that we include an experimental variation is the quality of feedback that we're giving participants after every round. So in the baseline treatment after they remember, so they select in which market they want to play, then they make this real effort task which is the same as in Laura Sanferlay's studies. And after this they are informed about their earnings. So their earnings are divided into their direct earnings which are the wages and the indirect earnings which are like the redistribution points that they get from being in the social welfare. So what happens in our treatment condition? In addition to this basic information, we also give them elements to compare both markets. So when they can compare these two markets, what they can learn is about labor market composition and about the average earnings in one of these markets. How, what is our point that maybe better information can create stronger focal points? And why focal points matter? Because if this is really a problem of not understanding the whole benefits of becoming formal, then understanding these additional benefits from redistribution when everyone is formal could make sense. So let me go rapidly on our contribution. So basically this design speaks to other experiments in which the institutions are chosen and dogenous by participants. So most of these experiments tend to do with voting schemes and with sanctioning rewards, whereas in our case, this is much closer to labor market selection and in the end to tax compliance. But still this is not directly a tax compliant experiment because most of these experiments are related to you perform a real effort task, you gain some income and then you decide how much do you want to declare. And most of the explorations there are related to the verification and monitoring functions, whereas this is not our case. What are we interested here? So what we do is just to create a group of six workers and calibrate the game in such a way that if you think that most of the workers will select the formal market, you should do the same. Whereas if you think that most of the workers will select the informal market, you should also copy them. So in other words, what we created was a design in which there are two potential coordination equilibrium and it will depends on what others do. So what do we explain to the participants? Given that we did this with students but also with a non-student population, we thought that it was important to let them understand where we were going with the study. So basically they knew that they could select a contributive market. So basically they will be paying taxes and they will have a higher wage. So we were paying 4,800 Colombian pesos per each solved task but then 50% of their income will go to taxes. And then for all the participants in this formal market from the whole collected amount, they have an efficient redistribution of this money. On the other hand, those in the non-contributive market were gaining much less for each correct task but then they were not paying any tax but still getting benefits from the total redistribution, from the total tax collection. So what I'm showing you here in this first equation, you need to pay attention to the entire story but just that here, those in the contributive market are paying taxes and then they're having like this efficient redistribution of what is of the tax revenue. Whereas here in the non-contributive or the informal market they are not paying any tax and still they're getting benefits. So as you can imagine part of the hard work here was to calibrate this and not just turn it into a cooperation dilemma. So most of the parameters for this game will just make people think that the best thing they could do always is just not go to the formal market. We calibrated in such a way that it was good for them to go to the formal market if they thought that most people was going there as well. So one more time that you will see are real effort tasks. Sorry. So same story, they were just coding letters into numbers. So what happened in each round? They selected whether they wanted to go to the formal or the informal market. Then we elicited beliefs on how many people do they think they were going to the market with taxes. Then they completed as many tasks as they could within 90 seconds. And finally we gave them feedback. And remember that this is our main treatment variation on the quality of the feed that we give them. Okay. So this was a procter online experiment conducted during the pandemic using O3. And most of the student participants were already registering in our lab. Whereas Stephanie, Ferley and Laura did a great job getting another sample of non-student participants for this. On average they earn about eight and a half dollars. And after they perform all these tasks we also elicited risk preferences in case they were important here. So let me just jump into the results. First of all, the take up of the formal market is relatively high, about 64%. And then with this additional market information that let them compare how good is one over the other market actually it increased the take up of the formal market by six percentage points. So this is like the main results in terms of information and then what I'm just telling you in the upcoming minutes is just like some results that help us explain why we find this. So, well, this is just the result I mentioned, I will skip it. But then if we think on whether people when they receive better information if they are actually using this information in future rounds and our response is yes. So actually if we see if their belief about how many people was going to the market was correct when we give them additional information about the market the likelihood that this belief is correct increases by 17 percentage points. So this is a non-negligible fraction. And so basically what we're saying here is look people is paying attention to this additional information and they're using this information when making follow up decisions. And just as another proof that they're taking this information into account what I'm showing you here is what are the what is the likelihood that they select the market with like the formal market as a function of how many other participants in their group do they think that will go to this market. And if this is really a coordination equilibrium what you will see is that the higher your beliefs of more people in this market see you are also more likely to go there. And the lower your belief that people is going to this market see then you will be also less likely to go there. So this positive line or pattern tell us that actually people is understanding this as we wanted that is a coordination game. Okay so another result I think it's helpful to understand whether we will, so why there was this ceiling on around 70% of take up of the formal market and our main guess for why this happens is how do you perform based on what you think that others are selecting as market. So in the darker line here what I'm just showing you is that when you select the market without taxes the higher the number of people that you think that went to the formal market the lower your productivity. So in other words if you know that there is sufficient people going to the formal market you know you don't need to make such a large effort when you're coding the task. So people is understanding quite well even if this is not rational from a best response point of view but at least they understand if they are going to the market without taxes they can rely for their income in terms of this redistributive income that they will receive. Whereas for those selecting the formal marketing which they will pay taxes actually nothing happens. So this line is basically flat. So you don't care about how many other people is going to the formal market you perform equally well. And just before closing what we have here is the dynamics of market selection. So basically based on which market you selected this round what are the probabilities of selecting either the formal or the informal market in the following round. So what I'm showing you here is that when you are in the baseline and you choose the market without taxes this is like an absorbent state. So once you're there and you don't have good information you're very likely to remain there. Even if the other market is also absorbing because if you see this number is much higher than 50 this number is even higher than 50 but then when you see what happens in the treatment with an additional market information where people can actually learn that in this formal market with taxes they can actually do well. If you see this number drops from 63% to 50%. So now it becomes like the top of a coin if you then choose to maybe try the other market. So apparently this additional information on benefits from going to the market with taxes calibrated in such a way that it makes sense to go that if everyone is going there could help that more people is going to this contributing market. So summing up, basically our point is trying to understand this component on market selection that has to do with coordination. So better information that allows you to compare both markets is helpful. Basically it may lead to higher take up rates of the formal market compared to a scenario without fewer information. And beliefs play a crucial role but more importantly remember that beliefs were much more accurate in the treatment with better information but still regardless of how accurate they were participants behave according to the coordination incentive that we provide. So in other words, maybe the solution is not in terms of improving beliefs about what is doing everyone else regarding these two markets but actually just showing these non-wage benefits and these long-term benefits of formal markets to people. So I think that's it, thank you.