Day Labour Project

In South Asia, three quarters of ultra-poor households report casual labour as the dominant form of income. In urban areas, short-term construction jobs are found through social connections or by going to a “labour stand”, essentially an intersection where low-skilled labourers wait each morning for employers looking to hire for a day or two. While spot markets like this are generally thought of to be the free-market ideal, these markets appear to be rife with failures including information asymmetries, wage rigidity and large search costs for employees and employers. The presence of these frictions often increases dependence on social relationships.

This project seeks to answer why exactly employers hire workers from their social network, what are the mechanisms at play and, in response to variation in the hiring process, how do workers change their investment in social capital versus productivity?

These questions will be tested through an RCT with a construction firm in Pakistan. Different aspects of the hiring process between contractors and labourers will be varied while observing the resulting effect on hiring patterns by contractors, labourer productivity and labourer investment in their social capital.