Jiayi Bao, University of North Carolina at Chapel Hill
Abstract: This paper provides a comprehensive study of unlimited vacation, an employee benefit that entails schedule flexibility and autonomy, through three complementary settings. Qualitative data (Setting 1) on benefits reviews are explored to motivate theoretical development. Evidence from a randomized controlled trial (Setting 2) suggests that, despite more vacation use, the unlimited vacation scheme improves overall labor efficiency through two channels that increase labor productivity: (i) attracting more high performers, and (ii) improving individual productivity. A field study (Setting 3) confirms the productivity effect and increased vacation use. Together, four organizational conditions in performance systems and social relationships are found to support larger labor efficiency gains under unlimited vacation: a stronger firing threat for under-performance, bundled features that emphasize performance, better managerial support, and greater team cohesion.