Search and matching frictions for day labourers

The majority of households living in extreme poverty receive some income from causal day labour, picking up short jobs, typically 1-5 days, in construction, agriculture or manual labour.

In South Asia, this is even starker, with 98% of households living below $1 a day engaging in casual labour. This labour market is characterized by low pay, short contracts, fixed wages and a time-consuming search process. During the lean season, workers only get work about half of the time, but often wait at labour stands for 2-3 hours a day.

For firms, it is difficult to screen workers for quality and reliability - 85% of construction work and the vast majority of agricultural hired labour in Pakistan is conducted through these short term, spot markets, so the inefficiencies in this type of labour arrangement affect SMEs, large firms and many public works projects that hire these workers.

This project seeks to understand how day labourers find work each day and measure frictions in the search and matching process. We will do this by:

1.Hiring several hundred workers from labour stands in Lahore for two days on a real construction site to measure their productivity;

2. Collecting data on the flow of job offers and matches and their search process over a one-month period for these workers; and

3. Introducing variation of the terms of the two-day job and measuring output and long term outcomes in response to the variation we introduce.