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Layoffs and Productivity at a Bangladeshi Sweater Factory

Author

Listed:
  • Robert Akerlof

    (University of Warwick)

  • Anik Ashraf

    (LMU Munich)

  • Rocco Macchiavello

    (London School of Economics and Political Science)

  • Atonu Rabbani

    (University of Dhaka)

Abstract
Conflicts between management and workers are common and can have significant impacts on productivity. Combining ethnographic, survey and administrative records from a large Bangladeshi sweater factory, we study how workers 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 likely had social connections - friends - that matters. Additional evidence on defect rates suggests a deliberate shading of performance by workers in order to punish the factory’s management.

Suggested Citation

  • Robert Akerlof & Anik Ashraf & Rocco Macchiavello & Atonu Rabbani, 2023. "Layoffs and Productivity at a Bangladeshi Sweater Factory," Rationality and Competition Discussion Paper Series 393, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:393
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    References listed on IDEAS

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    Cited by:

    1. Rocco Macchiavello, 2022. "Relational Contracts and Development," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 337-362, August.
    2. Erika Deserranno & Philipp Kastrau & Gianmarco León-Ciliotta, 2021. "Promotions and Productivity: The Role of Meritocracy and Pay Progression in the Public Sector," Working Papers 1239, Barcelona School of Economics.
    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;
    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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