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Labor Rationing

Author

Listed:
  • Emily Breza
  • Supreet Kaur
  • Yogita Shamdasani

Abstract

This paper measures excess labor supply in equilibrium. We examine hiring shocks—which employ 24% of the labor force in external month-long jobs—in Indian local labor markets. In peak months, wages increase instantaneously and local aggregate employment declines. In lean months, consistent with severe labor rationing, wages and aggregate employment are unchanged, with positive employment spillovers on remaining workers—indicating that over a quarter of labor supply is rationed. At least 24% of lean self-employment among casual workers occurs because they cannot find jobs. Consequently, traditional survey approaches mismeasure labor market slack. Rationing has broad implications for labor market analysis.

Suggested Citation

  • Emily Breza & Supreet Kaur & Yogita Shamdasani, 2021. "Labor Rationing," NBER Working Papers 28643, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28643
    Note: DEV LS PR
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    Cited by:

    1. Merfeld, Joshua D., 2020. "Smallholders, Market Failures, and Agricultural Production: Evidence from India," IZA Discussion Papers 13682, Institute of Labor Economics (IZA).
    2. Shamdasani, Yogita, 2021. "Rural road infrastructure & agricultural production: Evidence from India," Journal of Development Economics, Elsevier, vol. 152(C).

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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