Rapid industrial growth has generated high levels of pollution in many urban areas of developing countries. The authors study the role of pollution as a tax on worker effort in an Indian garment factory in Bangalore, India. The authors match hourly, worker-level data on garment production with multiple hourly PM2.5 measurements on two separate production floors and estimate a steep pollution-productivity gradient: a 10µg/m3 increase in pollution reduces hourly worker efficiency by more than .3 percentage points; a one-standard deviation increase (about 45 µg/m3 ) leads to a 1.4 percentage point (6%) decrease in efficiency.
The authors then document significant heterogeneity in this impact across production lines. We show that capable (i.e., experienced and “relatable”) line supervisors are able to flatten this gradient by 25 to 85 percent. Good managers are able to reallocate workers to tasks on high pollution days based on the heterogeneous effects of pollution on worker effort. Thus, in addition to the direct impacts of pollution and other environmental factors, re-optimization of the production process in response to productivity shocks is a mechanism through which management contributes to the productivity gap between firms in developed and developing country settings.
This research was funded under the Private Enterprise Development in Low-Income Countries (PEDL) Programme
Adhvaryu, A., Kala, N., Nyshadham, A. Management and Shocks to Worker Productivity: Evidence from Air Pollution Exposure in an Indian Garment Factory (2014) 33 pp