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  • 2021
  • Working Paper
  • HBS Working Paper Series

Absenteeism, Productivity, and Relational Contracts Inside the Firm

By: Achyuta Adhvaryu, Jean-François Gauthier, Anant Nyshadham and Jorge Tamayo
  • Format:Print
  • | Language:English
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Abstract

We study relational contracts among managers using a unique dataset that tracks transfers of workers across teams in Indian ready-made garment factories. We focus on how relational contracts help managers cope with worker absenteeism shocks, which are frequent, often large, weakly correlated across teams, and have substantial negative impacts on team productivity. Together these facts imply gains from sharing workers. We show that managers respond to shocks by lending and borrowing workers in a manner consistent with relational contracting, but many potentially beneficial transfers are unrealized. This is because managers’ primary relationships are with a very small subset of potential partners. Counterfactual simulations reveal large gains to forming additional relationships among managers.

Keywords

Implicit Contracts; Productivity; Misallocation; Absenteeism; Supervisors; Readymade Garments; Contracts; Relationships; Management; Employees; Behavior; Performance Productivity; Apparel and Accessories Industry; India

Citation

Adhvaryu, Achyuta, Jean-François Gauthier, Anant Nyshadham, and Jorge Tamayo. "Absenteeism, Productivity, and Relational Contracts Inside the Firm." Harvard Business School Working Paper, No. 21-109, March 2021.
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About The Author

Jorge Tamayo

Strategy
→More Publications

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More from the Authors
  • Human-Computer Interactions in Demand Forecasting and Labor Scheduling Decisions By: Caleb Kwon, Ananth Raman and Jorge Tamayo
  • How Do You Compete and Cooperate? Understanding Strategic Interactions By: Jorge Tamayo
  • Arcos Dorados’ Quest for the Digitalization of Last-Mile Delivery in Colombia (B) By: Jorge Tamayo, Jenyfeer Martinez Buitrago and Mariana Cal
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