Labor Rationing

This paper measures excess labor supply in equilibrium. We induce hiring shocks—which employ 24 percent of the force external month-long jobs—in Indian local markets. In peak months, wages increase instantaneously and aggregate employment declines. lean consistent with severe rationing, are unchanged, positive spillovers on remaining workers, indicating that over a quarter is rationed. At least self-employment among casual workers occurs because they cannot find jobs. Consequently, traditional survey approaches mismeasure market slack. Rationing has broad implications for analysis. (JEL E24, J22, J23, J31, J64, O15, R23)