The ties that bind us: Social networks and productivity in the factory

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. Using plausibly exogenous variation in the production lines' caste composition for almost 35,000 worker-days, we find that a 1 percentage point (pp) increase in the share of own caste workers in the line increases daily individual productivity by at least 0.09 pp. The least efficient worker's productivity, however, rises by almost 0.17 pp when the caste composition of the line becomes more homogeneous by 1 pp. These results are robust to unobservable heterogeneity in worker ability and line level trends. Production externalities, that induce greater effort through within-network peer effects, can potentially explain our findings.