Working Paper: NBER ID: w27006
Authors: Achyuta Adhvaryu; Vittorio Bassi; Anant Nyshadham; Jorge A. Tamayo
Abstract: How do firms pair workers with managers, and which constraints affect the allocation of labor within the firm? We characterize the sorting pattern of managers to workers in a large readymade garment manufacturer in India, and then explore potential drivers of the observed allocation. Workers in this firm are organized into production lines, each supervised by a manager. We exploit the high degree of worker mobility across lines, together with worker-level productivity data, to estimate the sorting of workers to managers. We find negative assortative matching (NAM) -that is, better managers tend to match with worse workers, and vice versa. This stands in contrast to our estimates of the production technology, which reveal that if the firm were to positively sort, productivity would increase by 1 to 4 percent across the six factories in our data. Coupling these findings with a survey of managers and with data on multinational brands and the orders they place, we document that NAM arises, at least in part, because the value of buyer relationships imposes minimum productivity constraints on each production line. Our results emphasize that suppliers to the global market, when they are beholden to a small set of powerful buyers, may be driven to allocate managerial skill to service these relationships, even at the expense of productivity.
Keywords: assortative matching; labor allocation; productivity; supply chains; manager-worker dynamics
JEL Codes: J24; L14; L23; M5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| better managers (M54) | worse workers (J81) |
| higher productivity workers (J29) | lower productivity managers (D29) |
| constraints related to global supply chains (F69) | negative assortative matching (NAM) (C78) |
| production deadlines (M11) | reallocate high-productivity workers to low-productivity lines (L23) |
| larger buyers (L81) | stronger degree of NAM (Q39) |
| negative assortative matching (NAM) (C78) | total productivity could increase by 1-4% under PAM (E23) |