Layoffs and Productivity at a Bangladeshi Sweater Factory

63 Pages Posted: 18 Aug 2020

See all articles by Robert Akerlof

Robert Akerlof

University of Warwick - Department of Economics

Anik Ashraf

affiliation not provided to SSRN

Rocco Macchiavello

London School of Economics & Political Science (LSE) - London School of Economics

Atonu Rabbani

University of Dhaka

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Date Written: 2020

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.

Keywords: layoffs, productivity, morale, relational contracts

JEL Classification: J500, M500, O120

Suggested Citation

Akerlof, Robert and Ashraf, Anik and Macchiavello, Rocco and Rabbani, Atonu, Layoffs and Productivity at a Bangladeshi Sweater Factory (2020). CESifo Working Paper No. 8492, Available at SSRN: https://ssrn.com/abstract=3676098 or http://dx.doi.org/10.2139/ssrn.3676098

Robert Akerlof (Contact Author)

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom

Anik Ashraf

affiliation not provided to SSRN

Rocco Macchiavello

London School of Economics & Political Science (LSE) - London School of Economics ( email )

United Kingdom

Atonu Rabbani

University of Dhaka ( email )

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