Where Do They Come From, Where Do They Go Labour Market Transitions in India

Azim Premji University,


Using two rounds of the Periodic Labour Force Survey (PLFS) covering the periods 2017 – 18 and 2018 – 19, we construct a panel of urban Indian individuals aged 15 to 65, and analyse the dynamics of their participation – or non-participation – in the labour force. We construct transition probabilities to study the movement of individuals through three distinct statuses — employment, unemployment and non-participation – at the aggregate level and for different demographic groups. We find evidence of considerable movements from the labour force to non-participation; there exists a significant discouraged worker effect as well as a pronounced movement from employment outside the labour force, specifically for women. A majority of those unemployed in the beginning of the year remain so at the end of the year, indicating the presence of long-term unemployment. The reduction in unemployment rates from 2017 – 18 to 2018 – 19 hides significant weaknesses in Indian urban labour markets. This study represents an original contribution to the field of Indian labour economics, given the paucity of large-scale studies of the dynamics of Indian labour.


  • Rahul Menon
  • Paaritosh Nath