Impediments to Contract Enforcement in Day Labour Markets: A Perspective from India

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. It is found 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 relation-based contract enforcement, it is found that labourers in large markets, with greater linguistic and caste-based diversity, are more likely to be reneged. It is argued that interventions aimed at facilitating access to formal mechanisms might help overcome some of the limitations with relation-based enforcement.