Job Recruitment Networks and Migration to Cities in India

Vegard Iversen, Kunal Sen, Arjan Verschoor and Amaresh Dubey

Journal of Development Studies, 2009, vol. 45, issue 4, 522-543

Abstract: 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.

Date: 2009
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DOI: 10.1080/00220380902725688

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