Absenteeism, Productivity, and Relational Contracts Inside the Firm

Achyuta Adhvaryu (University of Michigan)
Jean-Francois Gauthier (University of Michigan)
Anant Nyshadham (University of Michigan)
Jorge Tamayo (Harvard Business School)

Abstract : Relational contracts are essential building blocks of the theory of the firm. Yet empirical evidence of the properties of these contracts within firms is limited by the scarcity of records of coworker cooperation. To address this gap, we leverage a unique dataset that tracks transfers between production line managers in Indian ready-made garment factories. We study how managers cope with worker absenteeism on their teams. We first document that worker absenteeism shocks are frequent, often large, weakly correlated across managers, and have substantial negative impacts on team productivity. There are thus gains from sharing workers. We show that managers do indeed respond to shocks by lending and borrowing workers in a manner consistent with relational contracting. But many potentially beneficial transfers are left unrealized, meaning that while relational contracts mitigate some of the adverse impacts of shocks, risk is still imperfectly shared across managers. This is because managers’ primary relationships are with a very small subset of potential partners, who tend to be demographically similar and work on spatially contiguous lines. Counterfactual simulations show that there is potential for large gains to the firm from reducing the barriers to forming additional relationships among managers. Even at the high observed levels of worker absenteeism, resolving as much of the worker misallocation problem as possible through these relationships can meaningfully increase productivity.

Salary History Disclosures and Hiring Outcomes: Evidence from a Field Experiment

Amanda Agan (Rutgers University)
Bo Cowgill (Columbia University)
Laura Gee (Tufts University)

Abstract : What is the effect of job candidates disclosing their salary history on callbacks and salary offers? If these effects differ by a job candidate's gender or the amount they disclose, then disclosure might also impact inequality in the labor market. We implement a field experimental design we call a two-sided audit study, in which recruiters evaluate job applications with randomized characteristics under randomly assigned salary disclosure conditions. We begin by estimating the effects of candidates' salary disclosure on outcomes such as callbacks and salary offers. Then, we combine our estimates to examine the likely effect of recent laws that ban employers from asking candidates for their salary history like those passed in Massachusetts, California, New York City, and Chicago on wage inequality.

Relational Skills, Endogenous Matching, and Business Performance: a Field Experiment with Entrepreneurs in Togo

Stefan Dimitriadis (Rotman School of Management, University of Toronto)
Rembrand Koning (Harvard Business School)

Abstract : Why do some entrepreneurs have better networks of peer relationships than others? We argue that relational skills—the ability to communicate effectively and interact collaboratively with new acquaintances—are an important but overlooked factor in the formation of peer relationships between entrepreneurs. We hypothesize that improving entrepreneurs’ relational skills will affect the relationships they form and their business performance. To test our theory, we conducted a pre-registered field experiment in Togo with 301 entrepreneurs who were randomized into a relational skills training that was embedded in a business training program. We found that entrepreneurs who were exposed to relational skills training formed 50% more relationships with peer entrepreneurs. These relationships exhibited more matching based on managerial skills and were more ethnically diverse. Finally, relational skills training also substantially increased entrepreneurs’ business performance. Our findings highlight how soft skills, such as relational skills, play a central role in entrepreneurs’ ability to overcome social barriers, match with peers, and create value.