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Network mechanisms and social ties in markets for low- and unskilled jobs: (theory and) evidence from North-India

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Author Info

  • Iversen, Vegard Iversen

    ()
    (University of Manchester)

  • Torsvik, Gaute

    ()
    (Department of Economics, University of Bergen)

Abstract

Abstract: Workplace referrals may resolve incentive problems that arise due to incomplete contracts. We use an in-depth primary data set covering low- and unskilled migrants from Western Uttar Pradesh (India), to examine this and alternative explanations for referral-based recruitment. We find little evidence of referral screening for unobservable worker traits, but some support for a hypothesis of referral as a mechanism to enforce workforce discipline. Two observations back this conjecture: the high prevalence of strong kinship ties between referees and new recruits and that those who recruit are in more ‘prestigious’ jobs and therefore have higher stakes vis-à-vis their employer. These main findings are exposed to robustness checks to rule out rival explanations: that entry through a workplace insider merely reflects privileged access to job vacancy information; that workplace clustering results from preferences for working together or that the higher prevalence of referral for very young migrants that we observe may reflect that referral has an insurance dimension.

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Bibliographic Info

Paper provided by University of Bergen, Department of Economics in its series Working Papers in Economics with number 14/11.

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Length: 32 pages
Date of creation: 15 Dec 2011
Date of revision:
Handle: RePEc:hhs:bergec:2011_014

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Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway
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Web page: http://www.uib.no/econ/en
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Related research

Keywords: Work Migration; Social Networks; Screening; Moral Hazard;

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  1. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 115-136, Summer.
  2. Szeidl, Adam & Rosenblat, Tanya & Mobius, Markus & Karlan, Dean, 2009. "Trust and Social Collateral," Scholarly Articles 3051620, Harvard University Department of Economics.
  3. Oriana Bandiera & Iwan Barankay & Imran Rasul, 2009. "Social Connections and Incentives in the Workplace: Evidence From Personnel Data," Econometrica, Econometric Society, vol. 77(4), pages 1047-1094, 07.
  4. Banerjee, Biswajit, 1991. "The determinants of migrating with a pre-arranged job and of the initial duration of urban unemployment : An analysis based on Indian data on rural-to-urban migrants," Journal of Development Economics, Elsevier, vol. 36(2), pages 337-351, October.
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Cited by:
  1. Becker, Sascha O & Egger, Peter H & Von Ehrlich, Maximilian, 2012. "Absorptive Capacity and the Growth and Investment Effects of Regional Transfers: Regression Discontinuity Design with Heterogeneous Treatment Effects," CAGE Online Working Paper Series 89, Competitive Advantage in the Global Economy (CAGE).

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