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Impediments to contract enforcement in day labour markets: A perspective from India
Published in Cambridge University Press
Volume: 12
Issue: 3
Pages: 651 - 676

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.

About the journal
JournalData powered by TypesetJournal of Institutional Economics
PublisherData powered by TypesetCambridge University Press
Open AccessNo
Concepts (2)
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    General economics
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    Econometrics and finance