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Field
Primary Outcomes (End Points)
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Before
1) Acceptance of contracts on the firm side
2) Job acceptance on the worker side
3) Productivity of workers (no of hours worked, absenteeism) when they are matched with firms.
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After
1) Acceptance of contracts (and the associated wages) on the firm side
2) Job acceptance (and the associated wages) on the worker side
3) Productivity of workers (no of hours worked, absenteeism) when they are matched with firms.
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Field
Intervention (Hidden)
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Before
Globally, an estimated 168 million people were international migrant workers in 2022, accounting for about 4.7% of the world’s labour force. Within India, approximately 50 million people migrated for work in 2011. Economic disparities across regions and, in particular, the absence of work during lean seasons in rural areas force low-income workers to migrate to urban areas. Classic models of labour migration suggest that firms may be willing to hire these workers because their reservation wages are lower than those of workers in destination labour markets. At the same time, urban labour markets in India have a surplus of local workers, with a substantial number of local workers being rationed and unemployment rates in spot markets as high as 50%. If this high unemployment is primarily driven by in-migration, it should imply that the reservation wages of local workers fall and converge toward the wages of migrant workers, or else there must be additional non-pecuniary reasons why firms prefer to hire migrant workers.
There are several reasons why firms may prefer to hire migrant workers over local workers at the same wage. Relative to the rural communities from which they originate, migrant workers in urban informal labour markets have less access to state social welfare programmes and to within-network risk sharing. By contrast, local workers retain access to social welfare from the state and informal insurance from their kin. A weaker local social network reduces workers’ social obligations, which can lower worker absenteeism and thereby firm profits. Increased economic and social vulnerability can enable firms to exact more work from migrant workers for the same pay. In addition to reduced absenteeism and the scope for excess work extraction, migrant workers may be more motivated to work hard and may have higher ability, which may further drive firms’ preference to hire them. Overall, migrant workers may be more productive compared to local workers from the firm's point of view at the same wage.
In this paper, we will use two experiments to answer three questions. First, we study whether firms in destination labor markets prefer to hire migrant workers at higher rates than local workers when wages are held constant. Second, we analyze the reasons that drive firms’ preference for migrant workers. We will use a combination of experiments and surveys to decompose the higher demand for migrant workers. Third, we study whether workers’ beliefs about firms’ reasons for hiring migrant workers align with the reasons we infer from firms’ behavior in our experiments, and how reducing concerns about excess work exaction changes workers’ responses to migration.
The first experiment will be conducted with firms, where we will offer firms an opportunity to hire workers of different types (including local and migrant workers) on a menu of contracts which create variation in the expected productivity of workers. One contract out of this menu will be randomly implemented at the end of experiment. In the second experiment, we will make job offers to (local and migrant) workers on randomized contracts (more detail on the experimental design are given in the paragraphs that follow).
Finally, workers from the first two experiments will be matched with each other and we will observe the productivity of workers on the intensive and extensive margin across different contracts.
In addition to the incentive compatible job experiments, we will conduct incentivized survey experiments with firms to understand their beliefs about productivity of different type of workers. Similarly, we will conduct survey experiments with workers to understand their beliefs about working in local and migrant markets.
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After
Globally, an estimated 168 million people were international migrant workers in 2022, accounting for about 4.7% of the world’s labour force. Within India, approximately 50 million people migrated for work in 2011. Economic disparities across regions and, in particular, the absence of work during lean seasons in rural areas force low-income workers to migrate to urban areas. Classic models of labour migration suggest that firms may be willing to hire these workers because their reservation wages are lower than those of workers in destination labour markets. At the same time, urban labour markets in India have a surplus of local workers, with a substantial number of local workers being rationed and unemployment rates in spot markets as high as 50%. If this high unemployment is primarily driven by in-migration, it should imply that the reservation wages of local workers fall and converge toward the wages of migrant workers, or else there must be additional non-pecuniary reasons due to which firms prefer to hire migrant workers.
There are several reasons why firms may prefer to hire migrant workers over local workers at the same wage. Relative to the rural communities from which they originate, migrant workers in urban informal labour markets have less access to state social welfare programmes and to within-network risk sharing. By contrast, local workers retain access to social welfare from the state and informal insurance from their kin. A weaker local social network reduces workers’ social obligations, which can lower worker absenteeism and thereby increase firm profits. Increased economic and social vulnerability can enable firms to exact more work from migrant workers for the same pay. In addition to reduced absenteeism and the scope for excess work extraction, migrant workers may be more motivated to work hard and may have higher ability, which may further drive firms’ preference to hire them. Overall, migrant workers may be more productive compared to local workers from the firm's point of view at the same wage.
In this paper, we will use two experiments to answer three questions. First, we study whether firms in destination labor markets prefer to hire migrant workers at higher rates than local workers when wages are held constant. Second, we analyze the reasons that drive firms’ preference for migrant workers. We will use a combination of experiments and surveys to decompose the higher demand for migrant workers. Third, we study whether workers’ beliefs about firms’ reasons for hiring migrant workers align with the reasons we infer from firms’ behavior in our experiments. We will also study how reducing risks of about excess work exaction changes workers’ responses to migration.
The first experiment will be conducted with firms, where we will offer firms an opportunity to hire workers of different types (including local and migrant workers) on a menu of contracts which create variation in the expected productivity of workers. One contract out of this menu will be randomly implemented at the end of experiment. In the second experiment, we will make job offers to (local and migrant) workers on randomized contracts (more detail on the experimental design are given in the paragraphs that follow).
Finally, workers from the first two experiments will be matched with each other and we will observe the productivity of workers on the intensive and extensive margin across different contracts.
In addition to the incentive compatible job experiments, we will conduct incentivized survey experiments with firms to understand their beliefs about productivity of different type of workers. Similarly, we will conduct survey experiments with workers to understand their beliefs about working in local and migrant markets.
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