WORKER SORTING, DISCIPLINE & DEVELOPMENT

Principal Investigators: Antoinette Schoar (MIT), David Atkin (Yale)
Research Team: Samir Kiuhan, Pratibha Joshi
LEAD Centre: Small Enterprise Finance Centre (SEFC)
Focus Area: SME Finance
Project Geography: Chennai, Tamil Nadu
Partner: SME Initiative IPA, IGC
Status: On-going

Background:

The main objective of this study is to determine if workers in larger firms are more productive than those in small firms and if so, why. Productivity differences between office and home-based work may be driven purely by stricter office-based production methods but also by the workers’ skillset. If higher-effort higher-ability workers are drawn to a particular work environment, that also explain dissimilarities in productivity.

From a policy perspective, understanding the sources of productivity differences between large and small firms is crucial for evaluating the merits of policies that aim to alter the allocation of workers between these two types of firm. As a concrete example, take India’s Small Scale Reservation policy where certain products were reserved for manufacture by small firms. If larger-scale factory environments substantially raise productivity, such policies will be detrimental to growth.