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The Ties That Bind Us: Social Networks and Productivity in the Factory

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  • Afridi, Farzana
  • Dhillon, Amrita
  • Sharma, Swati

Abstract

We use high frequency worker level productivity data from garment manufacturing units in India to study the effects of caste-based social networks on individual and group productivity when workers are complements in the production function but wages are paid at the individual level. Using exogenous variation in production line composition for almost 35,000 worker-days, we find that a 1 percentage point increase in the share of own caste workers in the line increases daily individual productivity by about 10 percentage points. The lowest performing worker increases her effort by more than 15 percentage points when the production line has a more homogeneous caste composition. Production externalities that impose financial costs due to worker's poor performance on co-workers within her social network can explain our findings. Our results suggest that even in the absence of explicit group-based financial incentives, social networks can be leveraged to improve both worker and group productivity.

Suggested Citation

  • Afridi, Farzana & Dhillon, Amrita & Sharma, Swati, 2020. "The Ties That Bind Us: Social Networks and Productivity in the Factory," CEPR Discussion Papers 14687, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:14687
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    Cited by:

    1. Afridi, Farzana & Dhillon, Amrita & Li, Sherry Xin & Sharma, Swati, 2020. "Using social connections and financial incentives to solve coordination failure: A quasi-field experiment in India's manufacturing sector," Journal of Development Economics, Elsevier, vol. 144(C).
    2. Dhillon, Amrita & Peeters, Ronald & Bartrum, Oliver & Yüksel, Ayşe Müge, 2020. "Hiring an employee’s friends is good for business: Overcoming moral hazard with social networks," Labour Economics, Elsevier, vol. 67(C).
    3. Hasan, Iftekhar & Manfredonia, Stefano, 2022. "Productivity, managers’ social connections and the financial crisis," Journal of Banking & Finance, Elsevier, vol. 141(C).
    4. Iftekhar Hasan & Stefano Manfredonia, 2021. "Productivity, managers' social connections and the Great Recession," CEIS Research Paper 507, Tor Vergata University, CEIS, revised 10 Mar 2021.

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    More about this item

    Keywords

    assembly lines; caste; India; labor productivity; Social Networks;
    All these keywords.

    JEL classification:

    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • Y40 - Miscellaneous Categories - - Dissertations - - - Dissertations
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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