Labor Rationing

Emily Breza, Supreet Kaur and Yogita Shamdasani

No 28643, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E24 J2 J6 O10 O17 (search for similar items in EconPapers)
Date: 2021-04
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Published as Emily Breza & Supreet Kaur & Yogita Shamdasani, 2021. "Labor Rationing," American Economic Review, vol 111(10), pages 3184-3224.

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