Measuring the Indirect Effects of Adverse Employer Behaviour on Worker Productivity: a field Experiment

We conduct a field experiment to study how worker productivity is affected if employers act adversely towards their co-workers. Our employees work for two shifts in a call-center. In our main treatment, we lay off some workers before the second shift. Compared to two control treatments, we find that the layoff reduces the productivity of unaffected workers by 12%. We find suggestive evidence that this result is not driven by altered beliefs about the job or the management’s competence, but caused by the workers’ perception of unfair employer behavior. The latter interpretation is confirmed in a prediction experiment with professional HR managers. Our results suggest that the price for adverse employer behavior goes well beyond the potential tit-for-tat of directly affected workers. JEL codes: Gift Exchange, Labor Markets, Productivity, Layoffs, Field Experiment