Vegard Iversen on employee referral, social proximity and worker discipline: theory and suggestive evidence from India

WIDER Seminar Series

Vegard Iversen on employee referral, social proximity and worker discipline: theory and suggestive evidence from India

Vegard Iversen will present this paper at the WIDER Seminar Series on 3 April 2019. 

Abstract – Employee referral, social proximity and worker discipline: theory and suggestive evidence from India

We propose a new theory to explain why employers mobilize workplace insiders for the hiring of new staff. In settings with incomplete contracts, we show how workplace insiders can help employers tackle recruit discipline challenges at a lower cost. A key idea is that the employer can use sanctions against the referee to keep the new hire in line.

Our model predicts that employers will use existing staff of stature and with accumulated goodwill within the firm as referees, since such staff have a personal stake in their choice of recruit. The model also predicts a strong social tie between the referee and the recruit to ensure that the recruit internalizes the costs to the referee of own misbehavior or underperformance. We use a small, in-depth dataset from India to scrutinize how well the predictions of our theory and of the main rival explanations for referral align with social tie, referee stake, wage and labor turnover observations. We find suggestive support for our theory and argue that these findings are hard to reconcile with rival referral explanations.

About the speaker

Vegard Iversen recently returned to UK academia after living and working in India for 12 years. He is a Professor of Development Economics and the Head of the Livelihoods and Institutions Department (LID) at the Natural Resource Institute (NRI), University of Greenwich.

After completing a PhD in (development) economics from University of Cambridge in 2000, he spent six years as tenured Faculty at School of Development Studies (now International Development), University of East Anglia. He has been a Research Fellow at IFPRI (International Food Policy Research Institute), a visiting Faculty at Indian Statistical Institute, Delhi Centre, and a Professor and Vice Dean at Jindal School of Government and Public Policy. From 2015 to 2017, he was an (India-based) Adjunct Professor at Sanford School of Public Policy at Duke University and from 2017 to 2018 a Professor (Economics Area) at Indian Institute of Management Ahmedabad.

Vegard’s research interests span a wide thematic canvas and include (time in office effects on) women in politics; persistence and change in caste-based and other inequality in rural India; agricultural history and the long-term effects of colonial policies on contemporary agricultural and other development; labour markets and social networks; social mobility in developing countries.

Together with co-author Richard Palmer-Jones, he received the annual Dudley Seers Prize for the best paper published in Journal of Development Studies in 2008. He has been the Editor in-Chief for Journal of South Asian Development since 2012 and on the Editorial Board of Journal of Development Studies since 2016.

WIDER Seminar Series

The WIDER Seminar Series showcases recent and ongoing work on key topics in development economics. The weekly sessions held in Helsinki are open to local and visiting researchers, policy makers, and others interested in development topics. Click here to learn more.

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