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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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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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  • Iversen, Vegard Iversen & Torsvik, Gaute, 2011. "Network mechanisms and social ties in markets for low- and unskilled jobs: (theory and) evidence from North-India," Working Papers in Economics 14/11, University of Bergen, Department of Economics.
  • Handle: RePEc:hhs:bergec:2011_014
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    File URL: http://www.uib.no/filearchive/wp-14-11.pdf
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    1. Dean Karlan & Markus Mobius & Tanya Rosenblat & Adam Szeidl, 2009. "Trust and Social Collateral," The Quarterly Journal of Economics, Oxford University Press, pages 1307-1361.
    2. 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, July.
    3. 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.
    4. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 115-136, Summer.
    5. Vegard Iversen & Gaute Torsvik, 2010. "Networks, middlemen and other (urban) labour market mysteries," Indian Growth and Development Review, Emerald Group Publishing, vol. 3(1), pages 62-80, April.
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    Cited by:

    1. Dhillon, Amrita & Iversen, Vegard & Torsvik, Gaute, 2012. "Employee referral, social proximity and worker discipline," CAGE Online Working Paper Series 90, Competitive Advantage in the Global Economy (CAGE).

    More about this item

    Keywords

    Work Migration; Social Networks; Screening; Moral Hazard;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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