No Line Left Behind: Assortative Matching Inside the Firm

57 Pages Posted: 22 Oct 2019 Last revised: 3 Aug 2020

See all articles by Achyuta Adhvaryu

Achyuta Adhvaryu

University of Michigan at Ann Arbor

Vittorio Bassi

University of Southern California - Department of Economics

Anant Nyshadham

Boston College - Department of Economics

Jorge Tamayo

Harvard University - Business School (HBS)

Multiple version iconThere are 3 versions of this paper

Date Written: September 23, 2019

Abstract

How do firms pair workers with managers, and which constraints affect the allocation of labor within the firm? We characterize the sorting pattern of managers to workers in a large readymade garment manufacturer in India, and then explore potential drivers of the observed allocation. Workers in this firm are organized into production lines, each supervised by a manager. We exploit the high degree of worker mobility across lines, together with worker-level productivity data, to estimate the sorting of workers to managers. We find negative assortative matching (NAM) - that is, better managers tend to match with worse workers, and vice versa. This stands in contrast to our estimates of the production technology, which reveal that if the firm were to positively sort, productivity would increase by 1 to 4 percent across the six factories in our data. Coupling these findings with a survey of managers and with data on multinational brands and the orders they place, we document that NAM arises, at least in part, because the value of buyer relationships imposes minimum productivity constraints on each production line. Our results emphasize that suppliers to the global market, when they are beholden to a small set of powerful buyers, may be driven to allocate managerial skill to service these relationships, even at the expense of productivity.

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

JEL Classification: J24, L14, L23, M5

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

Achyuta Adhvaryu

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

Vittorio Bassi (Contact Author)

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
United States

Anant Nyshadham

Boston College - Department of Economics ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Jorge A. Tamayo

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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