Working Paper: NBER ID: w28643
Authors: 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.
Keywords: No keywords provided
JEL Codes: E24; J2; J6; O10; O17
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| hiring shock (J63) | wage levels (J31) |
| hiring shock (J63) | aggregate employment (E10) |
| hiring shock during lean months (J23) | wage levels (J31) |
| hiring shock during lean months (J23) | aggregate employment (E10) |
| labor rationing (J89) | employment spillovers (J68) |
| labor rationing (J89) | self-employment (L26) |