No Line Left Behind: Assortative Matching Inside the Firm

We leverage the high degree of worker mobility across production lines in a large Indian manufacturer to estimate the sorting of workers to managers, using data on daily worker productivity. We find negative assortative matching (NAM) – i.e., better workers tend to be matched with worse managers. Estimates of the production technology, however, reveal that productivity would increase by up to 4% under positive sorting. Coupling these findings with a survey of managers and data on orders from multinational brands, we document that NAM arises, at least in part, because maintaining valuable relationships with buyers provides strong incentives to avoid delays on any given production line. Our results highlight how supply chain relationships shape production decisions at the firm level by affecting the internal organization of labor, and how profit maximization may not equate to productivity maximization for suppliers when such relationships hold substantial value.

Keywords: Assortative Matching, Management, Productivity, Global Buyers, Readymade Garments, India

JEL Classification: J24, L14, L23, M5

Suggested Citation: Suggested Citation

Adhvaryu, Achyuta and Bassi, Vittorio and Nyshadham, Anant and Tamayo, Jorge A., No Line Left Behind: Assortative Matching Inside the Firm (September 23, 2019). Available at SSRN: https://ssrn.com/abstract=3462873 or http://dx.doi.org/10.2139/ssrn.3462873