Labour rationing and forced entrepreneurship in village India

When individuals are rationed out of the labour market, this not just decreases welfare but can also create labour misallocation as rationed workers may turn to less-productive self-employment activities. This behaviour of rationed workers has been referred to as “disguised unemployment” and more recently as “forced entrepreneurship”. In a developing country with high self-employment, an individual who cannot find work in the casual labour market may report spending time on their household enterprise, making it difficult to distinguish true productive self-employment from disguised unemployment or forced entrepreneurship. This project uses a novel experimental methodology to quantify labour rationing in rural labour markets, and decompose it into involuntary unemployment and forced entrepreneurship.

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