Layoffs and Productivity at a Bangladeshi Sweater Factory

Akerlof, Robert; Ashraf, Anik; Macchiavello, Rocco und Rabbani, Atonu (7. May 2023): Layoffs and Productivity at a Bangladeshi Sweater Factory. Collaborative Research Center Transregio 190, Discussion Paper No. 393

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.

• Item Type: Paper
• Keywords: layoffs; productivity; morale; relational contracts
• Faculties: Economics > Collaborative Research Center Transregio "Rationality and Competition"
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: J50, M50, O12
• Language: English