Three Essays on Labor Markets in India

The first chapter studies the contractual frictions which arise in low wage labor markets due to liquidity constraints and limited commitment on both sides of the market. Using three field experiments I show that these frictions are quantitatively large and lead to significant inefficiencies. The second chapter analyses undercutting behavior of workers in wage negotiations with firms at spot markets. It highlights that despite oversupply of labor and high unemployment, rate of undercutting is fairly low. Using variation in job contract structure, the chapter shows that workers value of leisure hours is a crucial determinant of their undercutting behavior. Unlike the first two chapters which focus on contemporary labor markets, the third chapter looks at labor markets over a long period of time on both sides of the boundary of the princely state of Hyderabad. The chapter shows that outcomes of different caste groups on either side of the boundary were affected by the differences in the ruling order and the labor institutions that arose as a consequence of those orders.