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Impediments to contract enforcement in day labour markets: a perspective from India

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  • NARAPARAJU, KARTHIKEYA

Abstract

In developing countries, lack of formal contract enforcement mechanisms is compensated by informal governance enforced through trust, kinship, reputation, etc. This paper focuses on one such setting in India's urban informal economy: the ‘day labour’ market for casual labour. We survey seven such markets in Navi Mumbai (a city on the outskirts of Mumbai), and find considerable incidence of contract enforcement problems in the form of employers reneging on wage payments to labourers. We find that payments to labourers with access to social networks and a record of work done are less likely to be reneged. Further, consistent with the literature on the limits of informal enforcement, we find that labourers in large markets, with greater linguistic and caste-based diversity, are more likely to be reneged. We argue that interventions aimed at facilitating access to formal mechanisms might help overcome some of the limitations with informal enforcement.

Suggested Citation

  • Naraparaju, Karthikeya, 2016. "Impediments to contract enforcement in day labour markets: a perspective from India," Journal of Institutional Economics, Cambridge University Press, vol. 12(3), pages 651-676, September.
  • Handle: RePEc:cup:jinsec:v:12:y:2016:i:03:p:651-676_00
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    Cited by:

    1. Izabela Ostoj, 2019. "On the validity of the division into formal and informal institutions," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 18(1), pages 61-72, March.
    2. Yugank Goyal, 2018. "The Coal Mine Mafia of India: A Mirror of Corporate Power," American Journal of Economics and Sociology, Wiley Blackwell, vol. 77(2), pages 541-574, March.

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