2021
Working Paper
HBS Working Paper Series

Absenteeism, Productivity, and Relational Contracts Inside the Firm

By: Jorge Tamayo, Achyuta Adhvaryu, Jean-Francois Gauthier and Anant Nyshadham

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; Management; Supervisors; Readymade Garments; India

Citation

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