Familiar Strangers: Evidence from Referral-based Hiring Experiments in India

Best Paper Award, 7th QMUL Economics and Finance PhD Workshop

In developing-country labor markets, search frictions and network-based hiring sustain high churn and exclude poorly-connected workers, suggesting a potential for misallocation. I test whether redirecting referrals toward underrepresented minority workers in such segmented labor markets can raise both equity and productivity. In an Indian manufacturing firm, I experimentally increased the share of referral invitations allocated to minority lower caste incumbents. The policy raised their employment share by 15 pp (62%) and raised team output by 0.09 s.d. (5%). This improvement in production was driven by reduced monthly turnover which was lower by 4 pp (41%). Importantly, treatment did not induce declines in worker cohesion, contrary to common concerns about diverse and heterogeneous teams. A supplementary lab-in-field experiment pins down the mechanism: when lower caste workers enter as outsiders rather than via referrals, cohesion falls by 9% and output 22%, implying that recruitment mode -- not entrant identity -- drives short-run costs. At the firm, supervisors exposed to the policy continued to allocate referrals to lower caste workers after the intervention concluded, consistent with Bayesian learning which I rationalize with a model. Lower caste referral candidates saw large gains in job offers and employment, with no detectable displacement of upper caste candidates. Redirecting referrals can thus reassign jobs toward workers with low outside options, improving their labor market prospects as well as firm performance.

The Long Shadow of Feudalism: Concentration of Land and Labor Market Power in India

Weiss Distinguished PhD Research Paper Award, NEUDC 2024

with Steven Brownstone

Land is power: both state and non-state actors have understood this for centuries, but the causal impacts of land concentration are notoriously difficult to study. We study how differences in village land concentration stemming from the granting of feudal titles hundreds of years ago affect present-day labor markets in India. We exploit variation in land tenure systems at a more granular level than is seen in the literature on the long-run effects of land tenure systems, implementing a regression discontinuity along feudal borders that no longer correspond with modern administrative boundaries. Large discontinuities in land concentration persist across these boundaries, with the smallest land parcels in previously feudal areas 19% larger than their analogs in non-feudal areas. These differences are associated with 7% lower agricultural wages for women, but not men who are more able to travel and seek outside options. Importantly, these differences in wages persist despite no differences in yields, aggregate labor demand or supply, output prices, or other non-labor agricultural inputs. Village elected bodies in feudal areas scuttle the implementation of the key workfare program designed to provide agricultural labor with an outside employment option, with 71% fewer person-days offered during peak agricultural months when large landowners demand labor, and no difference the lean season when the program is most active. We show that the effect on the workfare program likely operates through caste-based links between large landowners and village elected representatives. This work emphasizes the effects of land inequality on local labor markets as a key mechanism through which inequities persist, and the value of outside options for workers where employers have market power.

Between Trust and Trade: On Informal Credit Networks in India

with Layane Alhorr and Alp Sungu

We study store credit, a deferred payment system offered by small businesses to customers across the developing world. We collected data from local shops in an urban Indian settlement, randomly offering subsidies for stores to provide either store credit, a price discount, or a business-as-usual control. Store credit increased businesses’ market share by encouraging more visits and higher spending. Even after subsidies ended, stores continued to extend credit to treated customers. Customers who received credit during the experiment were equally likely to repay as stores’ standard credit customers and shifted some spending from non-credit stores to credit-offering ones. We find suggestive evidence that credit helps customers smooth consumption, and increase consumption expenditure overall. Our results underscore the role of small businesses as local lenders and explain the prevalence of store credit for consumption smoothing and market access in developing countries. We suggest that customers in these settings have an unmet demand for credit but struggle to demonstrate creditworthiness, leading stores to under-experiment with lending. These findings indicate potential for increased credit access by subsidizing business experiments and reducing lending default risks.

Learning in Isolation: The Human and Social Capital Effects of Targeted Schooling Systems

with Naveen Kumar

Schools shape both what students know and whom they know. We study a system of high quality residential schools in India, that are targeted at disadvantaged castes, using oversubscribed Grade 5 admissions lotteries. Following one cohort to ages 21 and 25, we find that SWS attendance raises completed schooling by 0.38 years (3%), Grade 12 scores by 0.26 s.d., and college enrollment by 19%, closing nearly one-third of the caste gap in attainment. Yet these human-capital gains come with narrower social networks: treated students form 9% smaller and 89% more caste-homogeneous peer ties, which results in smaller job-search networks and a lower probability of finidng a job through referrals. Labor-market participation initially rises by 15% but later falls back as unemployment declines and employment levels converge. A simple search model shows how higher ability raises the value of search while homophilous networks slow job-offer arrivals. The results highlight that targeted schooling can equalize learning but not mobility when opportunity flows through segregated social networks.