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Job Recruitment Networks and Migration to Cities in India

  • Vegard Iversen
  • Kunal Sen
  • Arjan Verschoor
  • Amaresh Dubey

Economists have focused on job search and supply-side explanations for network effects in labour transactions. This paper develops and tests an alternative explanation for the high prevalence of network-based labour market entry in developing countries. In our theoretical framework, employers use employee networks as screening and incentive mechanisms to improve the quality of recruitment. Our framework suggests a negative relationship between network use and the skill intensity of jobs, a positive association between economic activity and network use and a negative relationship between network use and pro-labour legislation. Furthermore, social identity effects are expected to intensify when compared to information-sharing and other network mechanisms. Using data from an all-India Employment Survey, we implement a novel empirical strategy to test these relationships and find support for our demand-side explanation.

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Article provided by Taylor & Francis Journals in its journal Journal of Development Studies.

Volume (Year): 45 (2009)
Issue (Month): 4 ()
Pages: 522-543

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Handle: RePEc:taf:jdevst:v:45:y:2009:i:4:p:522-543
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  1. R. Jason Faberman, 2005. "Studying the Labor Market with the Job Openings and Labor Turnover Survey," Working Papers 388, U.S. Bureau of Labor Statistics.
  2. Kaivan Munshi & Mark Rosenzweig, 2006. "Traditional Institutions Meet the Modern World: Caste, Gender, and Schooling Choice in a Globalizing Economy," American Economic Review, American Economic Association, vol. 96(4), pages 1225-1252, September.
  3. Wahba, Jackline & Zenou, Yves, 2003. "Density, Social Networks and Job Search Methods: Theory and Application to Egypt," CEPR Discussion Papers 3967, C.E.P.R. Discussion Papers.
  4. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," NBER Working Papers 7580, National Bureau of Economic Research, Inc.
  5. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-25, March.
  6. Hatton, Timothy J. & Williamson, Jeffrey G., 1998. "The Age of Mass Migration: Causes and Economic Impact," OUP Catalogue, Oxford University Press, number 9780195116519.
  7. Timothy Besley & Robin Burgess, 2002. "Can labour regulation hinder economic performance? Evidence from India," LSE Research Online Documents on Economics 3779, London School of Economics and Political Science, LSE Library.
  8. D. Mazumdar, 1973. "Labour Supply in Early Industrialization: the Case of the Bombay Textile Industry," Economic History Review, Economic History Society, vol. 26(3), pages 477-496, 08.
  9. Yannis M. Ioannides & Linda Datcher Loury, 2004. "Job Information Networks, Neighborhood Effects, and Inequality," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1056-1093, December.
  10. Marmaros, David & Sacerdote, Bruce, 2002. "Peer and social networks in job search," European Economic Review, Elsevier, vol. 46(4-5), pages 870-879, May.
  11. De Weerdt, Joachim, 2002. "Risk-Sharing and Endogenous Network Formation," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
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