‘‘Missing and Fired: Worker Absence, Labor Regulation, and Firm Outcomes’’ presented by Nandita Krishnaswamy (USC).
Estimates from labor market surveys across various developing countries suggest that anywhere between 5-25% of scheduled worker days are lost to absences. High worker absenteeism may adversely impact firm productivity as firms bear large costs in coping with unanticipated absences and high worker turnover. While this observation of high worker absenteeism is not new – James (1960) provides a qualitative description of this problem in the Indian casual labor market context – there is virtually no empirical evidence documenting the magnitude of this problem, and its impact on firm outcomes.
To shed light on these questions, I use a large panel dataset from manufacturing firms in India, where worker absenteeism remains to be a severe problem despite strong economic growth in recent years. First, I show, using both a fixed effects and instrumental variables approach, that firms' coping mechanisms cannot fully make up for workers' absences: firms lose about 0.14% of mandays worked for a 1% increase in absenteeism, primarily from the workers who work directly on the production lines.
Correspondingly, firm revenue and profits fall by 0.21% and 0.30% respectively, for every percent increase in absenteeism. Interacting this with spatial variation in the regulatory structure that governs hiring and firing of workers, I find that firms fire more workers and hire new workers in response to absenteeism, particularly in states with less stringent labor regulations. Firms in states with less stringent regulations also face better outcomes in response to worker absence.
Nandita Krishnaswamy is a postdoctoral research scholar at the University of Southern California‘s Department of Economics, whose research interests lie at the intersection of labor and development, with a particular focus on rural labor markets. Prof. Krishnaswamy’s work ranges from exploring the impact of worker absenteeism on firms and investigating workers’ demand for flexible labor contracts to experimentally quantifying labor market frictions arising from informal village labor unions.
Sponsored by the Department of Economics Danforth-Lewis Speakers Series.