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  • 2020
  • Working Paper
  • HBS Working Paper Series

No Line Left Behind: Assortative Matching Inside the Firm

By: Achyuta Adhvaryu, Vittorio Bassi, Anant Nyshadham and Jorge Tamayo
  • Format:Print
  • | Language:English
  • | Pages:59
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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; Productivity; Global Buyers; Readymade Garments; Management; Employees; Performance Productivity

Citation

Adhvaryu, Achyuta, Vittorio Bassi, Anant Nyshadham, and Jorge Tamayo. "No Line Left Behind: Assortative Matching Inside the Firm." Harvard Business School Working Paper, No. 20-103, March 2020. (R&R Review of Economics and Statistics.)
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About The Author

Jorge Tamayo

Strategy
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  • Spatial Mobility, Economic Opportunity, and Crime By: Gaurav Khanna, Carlos Medina, Anant Nyshadham, Daniel Ramos-Menchelli, Jorge Tamayo and Audrey Tiew
  • The Health Costs of Dirty Energy: Evidence from the Capacity Market in Colombia By: Achyuta Adhvaryu, Theresa Molina, Anant Nyshadham, Jorge Tamayo and Nicholas Torres
  • Reskilling in the Age of AI By: Jorge Tamayo, Leila Doumi, Sagar Goel, Orsolya Kovács-Ondrejkovic and Raffaella Sadun
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