Labor Rationing
Emily Breza, Supreet Kaur, Yogita Shamdasani
American Economic Review · 2021 · Volume 111 · Issue 10
Abstract
This paper measures excess labor supply in equilibrium. We induce hiring shocks—which employ 24 percent 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 percent 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
Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital, Aggregate Labor Productivity, Time Allocation and Labor Supply, Labor Demand, Wage Level and Structure, Wage Differentials, Unemployment: Models, Duration, Incidence, and Job Search, Economic Development: Human Resources, Human Development, Income Distribution, Migration, Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration, Regional Labor Markets, Population, Neighborhood Characteristics
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