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Layoffs and productivity at a Bangladeshi sweater factor

Author

Listed:
  • Akerlof, Robert

    (University of Warwick)

  • Ashraf, Anik

    (LMU Munich)

  • Macchiavello, Rocco

    (London School of Economics and Political Science)

  • Rabbani, Atonu

    (University of Dhaka)

Abstract
Conflicts between management and workers are common and can have significant impacts on productivity. We study how workers in a large Bangladeshi sweater factory responded to management’s decision to lay off about a quarter of the workers following a period of labor unrest. Our main finding is that the mass layoff resulted in a large and persistent reduction in the productivity of surviving workers. Moreover, it is specifically the firing of peers with whom workers had social connections – friends – that matters. We also provide suggestive evidence of deliberate shading of performance by workers in order to punish the factory’s management, and a corresponding deliberate attempt by the factory to win the angry workers back by selectively giving them tasks that are more rewarding. By combining ethnographic and survey data on the socialization process with the factory’s internal records, the paper provides a rare glimpse into the aftermath of an episode of labor unrest. A portrait of the firm emerges as a web of interconnected relational agreements supported by social connections.

Suggested Citation

  • Akerlof, Robert & Ashraf, Anik & Macchiavello, Rocco & Rabbani, Atonu, 2020. "Layoffs and productivity at a Bangladeshi sweater factor," The Warwick Economics Research Paper Series (TWERPS) 1293, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:1293
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    References listed on IDEAS

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    Cited by:

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    3. Deserranno, Erika & Leon-Ciliotta, Gianmarco, 2022. "Promotions and Productivity: The Role of Meritocracy and Pay Progression in the Public Sector," CEPR Discussion Papers 15837, C.E.P.R. Discussion Papers.
    4. Alexander Ahammer & Matthias Fahn & Flora Stiftinger, 2023. "Outside options and worker motivation," Economics working papers 2023-08, Department of Economics, Johannes Kepler University Linz, Austria.

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    More about this item

    Keywords

    Layoffs ; Productivity ; Morale ; Relational Contracts JEL codes: J50 ; M50 ; O12;
    All these keywords.

    JEL classification:

    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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