Competitive Exams for Government Jobs and the Labor Supply of College Graduates in India

by Gayatri Dewan

We conducted the 14th Consumer Pyramids Research Seminar on 9 September 2021 at 06.30PM IST.

Kunal Mangal from Centre for Sustainable Development, Azim Premji University presented

Competitive Exams for Government Jobs and the Labor Supply of College Graduates in India

His work was discussed by Christina Brown from the Becker Friedman Institute for Economics at the University of Chicago

You can view a recording of the webinar here.

Event Summary

Kunal Mangal, from the Centre for Sustainable Development, Azim Premji University, presented findings from his study based on the Indian system of competitive exams for government jobs. Several candidates are known to dedicate a significant portion of their 20s towards exam preparation, leading to the concern that people are opting for unproductive preparation in lieu of productive activity. The author investigated whether such selective exams actually affect the broader economy as is believed.

For the purpose of his study, the author exploited a partial hiring freeze in Tamil Nadu between 2001-2006 and employed a difference-in-differences approach, with cross-state, and cross-cohort comparisons.

The results indicated that the hiring freeze led to an increase in the amount of time spent studying, rather than a decrease. Additionally, the candidates suffered both economically and socially they shifted into lower-paying occupations over the long term, and were less likely to marry and more likely to stay at home with their parents. Lastly, the study found that returns to exam preparations were convex, which encouraged candidates to study more despite the lack of vacancies.

Christina Brown, who served as the discussant for the paper, emphasized the large magnitude of the effects estimated by the study. She commented on the significance of such a hiring freeze for the entire labour market. She suggested looking at simultaneous effects of the shock to the state budget on the labour market, and outlined the scope for future work on the subject.

The webinar concluded with a lively discussion wherein Mangal responded to the suggestions, and took questions from the audience.


Many countries allocate government jobs through a system of merit-based exams. In India, these exams are highly competitive, with selection rates often less than 0.1%. Among recent college graduates, for whom application rates are the highest, does the competition for scarce and valuable government jobs affect labor supply? To answer this question, I study the labor market impact of a partial public sector hiring freeze in the state of Tamil Nadu between 2001 and 2006, which sharply reduced the number of public sector vacancies available through exams but otherwise left aggregate labor demand intact. I find that candidates responded by spending less time employed, and more time studying. A decade after the hiring freeze was lifted, the cohorts of men that spent more time studying now work in lower-paid occupations. To compensate, they live in households with more earning members, but this also means they delay forming their own households, being more likely to remain unmarried and live with their parents. Finally, I show that the shape of the returns to study effort helps explain why it is so costly for candidates to suspend exam preparation, even when vacancy availability falls. Together, these results indicate that public sector hiring policy has the potential to move the whole labor market.

About the CPHS Research Seminar Series

The CPHS Research Seminar Series features work based on the Consumer Pyramids Household Survey. It is a platform for researchers to receive critical and technical feedback from accomplished peers. It is also meant to engage with the larger research community who may gain from technical discussions. You can find all previously presented work on the Events Section of our website. You can also view a recording of every seminar so far at the CPHS Research Seminar Playlist on our YouTube channel.

The Consumer Pyramids Household Survey is India’s largest regular household survey and the world’s largest household panel survey. CPHS has collected data on over 232,000 households and 1.19 million individuals surveyed since 2014. The survey collects information on household demographics, individual identities, employment, health status, financial inclusion, individual and household incomes, consumption expenditures, ownership of assets and intentions to buy them, household amenities and consumer sentiments. Income and expenses data are a monthly time-series since January 2014.

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