NATIONAL BUREAU OF ECONOMIC RESEARCH
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Scabs: The Social Suppression of Labor Supply

Emily Breza, Supreet Kaur, Nandita Krishnaswamy

NBER Working Paper No. 25880
Issued in May 2019, Revised in November 2019
NBER Program(s):Development Economics Program, Labor Studies Program

Social norms have the potential to alter the functioning of economic markets. We test whether norms shape the aggregate labor supply curve by leading decentralized individuals to maintain wage floors in their local labor markets. We partner with existing employers who create new jobs for workers in informal spot labor markets. Unemployed workers would like to find work, and prefer to do so even at wages below the prevailing wage rather than remain unemployed. However, they rarely do so when this choice is observable to other workers. In contrast, social observability does not affect labor supply at the prevailing wage. Consistent with the idea that norms could have aggregate implications, measures of social cohesion correlate with downward wage rigidity and business cycle volatility across India.

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Document Object Identifier (DOI): 10.3386/w25880

 
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