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  • 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
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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; 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.
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    About The Author

    Jorge Tamayo

    Strategy
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    More from the Authors
    • Diagnosing Quality: Learning, Amenities, and the Demand for Health Care By: Jorge Tamayo, Achyuta Adhvaryu, Emilio Gutierrez and Anant Nyshadham
    • Exclusive Dealing and Entry by Competing Two-Sided Platforms By: Cristian Chica, Kenneth Chuk and Jorge Tamayo
    • Dynamic Competition for Customer Memberships By: Cristian Chica and Jorge Tamayo
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