*I examine the effects of industrial place-based policies in the presence of domestic distortions that contribute to informality, a widespread phenomenon in developing countries. I develop a quantitative spatial model in which the informal sector arises due to burdensome taxes and regulations that are imperfectly enforced by the government. As a result, smaller, less productive firms face fewer distortions than larger, more productive ones, leading to substantial misallocation. My model incorporates multiple channels through which place-based policies influence informality, generating opposing forces in their overall impact. I demonstrate that tax reductions in specific locations trigger a reallocation of resources from initially less distorted to more distorted firms in these areas, thereby increasing informality. My reduced-form analysis confirms that place-based policies can have positive effects on the informal sector. I aim to quantify the aggregate welfare implications and conduct counterfactual analyses to assess the efficiency of the zones’ spatial allocation.

**This paper explores the role of labor exchange networks and arrangements in rural agrarian economies, with a focus on how they respond to weather shocks and market integration. It examines the persistence of these arrangements and the interaction between labor exchange and the spot labor market in the context of liquidity constraints, with implications for welfare and productivity.