(how) Do Risky Perks Benefit Firms? the Case of Unlimited Vacation

Abstract: This paper addresses a popular trend in technology companies and startups of offering unlimited vacation as an employee perk. I examine whether unlimited vacation benefits firms, the mechanisms, and the contingencies based on organizational conditions in three empirical settings. Using a combination of text analysis of online reviews, difference-in-differences regression of archival data at a high-tech company, and randomized controlled experiments with online workers, I find that the perk leads to more vacation time, higher subjective productivity, and increased overall labor efficiency. These effects involve multiple mechanisms (sorting, productivity, and engagement) and are contingent on social dynamics, bundled HR practices, and the culture for punishing under-performance.