A Division of Laborers: Identity and Efficiency in India

53 Pages Posted: 15 Feb 2021 Last revised: 9 Apr 2021

See all articles by Guilhem Cassan

Guilhem Cassan

University of Namur

Daniel Keniston

Yale University; Yale University - Cowles Foundation; National Bureau of Economic Research (NBER); The International Growth Centre; Abdul Latif Jameel Poverty Action Lab (J-PAL)

Tatjana Kleineberg

World Bank

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Date Written: February 2021


Workers' social identity affects their choice of occupation, and therefore the structure and prosperity of the aggregate economy. We study this phenomenon in a setting where work and identity are particularly intertwined: the Indian caste system. Using a new dataset that combines information on caste, occupation, wages, and historical evidence of subcastes’ traditional occupations, we show that caste members are still greatly overrepresented in their traditional occupations. To quantify the effects of caste-level distortions on aggregate and distributional outcomes, we develop a general equilibrium Roy model of occupational choice. We structurally estimate the model and evaluate counterfactuals in which we remove castes' ties to their traditional occupations: both through their direct preferences, and also via their parental occupations and social networks. We find that the share of workers employed in their traditional occupation decreases substantially. However, effects on aggregate output and productivity are very small–and in some counterfactuals even negative–because gains from a more efficient human capital allocation are offset by productivity losses from weaker caste networks and reduced learning across generations. Our findings emphasize the importance of caste identity in coordinating workers into occupational networks which enable productivity spillovers.

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Suggested Citation

Cassan, Guilhem and Keniston, Daniel and Kleineberg, Tatjana, A Division of Laborers: Identity and Efficiency in India (February 2021). NBER Working Paper No. w28462, Available at SSRN: https://ssrn.com/abstract=3785796

Guilhem Cassan (Contact Author)

University of Namur ( email )

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Daniel Keniston

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Tatjana Kleineberg

World Bank ( email )

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