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Study Overview

In India, over 90 percent of workers are informally employed, often under short-term verbal contracts that require repeated negotiation. Standard models of relational contracting predict that repeated interaction and reputation should limit disputes, yet wage disputes persist in daily wage labor markets. This project studies the puzzle in Mumbai's labor nakas, informal hiring points where contractors and over 500,000 casual workers negotiate daily employment. Survey and administrative evidence show that disputes are widespread and arise on both sides: workers report non-payment, underpayment, and delayed wages, while contractors cite uncertainty about absenteeism, effort, and quality.

To understand why these disputes persist, I plan to conduct a cross-sectional survey with ~1,200 workers, collecting details on their employment, wages, credit constraints, and outside options. I will test competing models of relational contracting to identify which frictions generate disputes in Mumbai's labor markets. The project is designed to be feasible within six to eight months and to inform a future randomized controlled trial.

Study Results

The study is ongoing.

Populations: workers

IBSI Initiative or Center: Lab for Inclusive FinTech (LIFT)