Employee Referral, Social Proximity and Worker Discipline: Theory and Evidence from India
AbstractWe study an important mechanism underlying employee referrals into informal low skilled jobs in developing countries. Employers can exploit social preferences between employee referees and potential workers to improve discipline. The profitability of using referrals increases with referee stakes in the firm, and, in most cases, with the strength of the social tie between the referee and the new recruit. We provide an empirical counterpart to these results using primary data covering low- and unskilled migrants in India. Consistent with the theoretical predictions, we find a high prevalence of workplace referral and strong kinship ties between referees and new recruits. Finally, workplace intermediaries are different from and typically in more ‘prestigious’ jobs than those recruited.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4309.
Date of creation: 2013
Date of revision:
networks; low- and unskilled jobs; India; moral hazard; employee referrals; efficiency wages; referee incentives; strength of ties;
Other versions of this item:
- Dhillon, Amrita & Iversen, Vegard & Torsvik, Gaute, 2013. "Employee Referral, Social Proximity And Worker Discipline: Theory And Evidence From India," Working Papers in Economics 04/13, University of Bergen, Department of Economics.
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
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