nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2011‒05‒14
seventeen papers chosen by
Tommaso Reggiani
Universita' di Bologna

  1. Effects of Training on Employee Suggestions and Promotions in an Internal Labor Market By Pfeifer, Christian; Janssen, Simon; Yang, Philip; Backes-Gellner, Uschi
  2. Endogenous selection of comparison groups, human capital formation, and tax policy By Hyll, Walter; Stark, Oded; Wang, Yong
  3. The effect of occupation-specific brain drain on human capital By Heuer, Nina
  4. Human Capital and Economic Growth: Time Series Evidence from Pakistan By Faisal Sultan Qadri, Faisal; Dr. Abdul Waheed, Waheed
  5. Are Self-Employed Really Happier Than Employees? An Approach Modelling Adaptation and Anticipation Effects to Self-Employment and General Job Changes By Dominik Hanglberger; Joachim Merz
  6. Schooling, employer learning, and internal labor market effect: Wage dynamics and human capital investment in the Japanese steel industry, 1930-1960s By Nakabayashi, Masaki
  7. Persistent Productivity Differences Between Firms By TAKII Katsuya
  8. The Heterogeneous Economic Consequences of Works Council Relations By Pfeifer, Christian
  9. Effectiveness of HRD for developing SMEs in South Asia By Ahmed, Vaqar; Wahab, Mohammad Abdul; Mahmood, Hamid
  10. On the economic architecture of the workplace: repercussions of social comparisons amongst heterogeneous workers By Hyll, Walter; Stark, Oded
  11. Performance Pay and Multi-dimensional Sorting – Productivity, Preferences and Gender By Thomas Dohmen; Armin Falk
  12. Flexible Wage Contracts, Temporary Jobs and Worker Performance: Evidence from Italian Firms By Michele Battisti; Giovanna Vallanti
  13. Competition and Relational Contracts: The Role of Unemployment as a Disciplinary Device By Martin Brown; Armin Falk; Ernst Fehr
  14. Reference Points and Effort Provision By Johannes Abeler; Armin Falk; Lorenz Goette; David Huffman
  15. Monitoring and Pay: An Experiment on Employee Performance under Endogenous Supervision By Dittrich, Dennis A. V.; Kocher, Martin G.
  16. Institutions and Contract Enforcement By Armin Falk; David Huffman; W. Bentley Macleod
  17. Physician Payment Mechanisms, Hospital Length of Stay and Risk of Readmission: a Natural Experiment By Damien Échevin; Bernard Fortin

  1. By: Pfeifer, Christian (Leuphana University Lüneburg); Janssen, Simon (University of Zurich); Yang, Philip (University of Hannover); Backes-Gellner, Uschi (University of Zurich)
    Abstract: We evaluate the effects of employer-provided formal training on employee suggestions for productivity improvements and on promotions among male blue-collar workers. More than twenty years of personnel data of four entry cohorts in a German company allow us to address issues such as unobserved heterogeneity and the length of potential training effects. Our main finding is that workers have larger probabilities to make suggestions and to be promoted after they have received formal training. The effect on suggestions is however only short term. Promotion probabilities are largest directly after training but also seem to be affected in the long term.
    Keywords: productivity, insider econometrics, human capital, promotions, training
    JEL: J24 M53
    Date: 2011–04
  2. By: Hyll, Walter; Stark, Oded; Wang, Yong
    Abstract: This paper considers a setting in which the acquisition of human capital entails a change of location in social space that causes individuals to revise their comparison groups. Skill levels are viewed as occupational groups, and moving up the skill ladder by acquiring additional human capital, which in itself is rewarding, leads to a shift in the individual's inclination to compare himself with a different, and on average better-paid, comparison group, which in itself is penalizing. The paper sheds new light on the dynamics of human capital formation, and suggests novel policy interventions to encourage human capital formation in the aggregate and, at the same time, reduce inter-group income inequality. --
    Keywords: Human capital formation,Skill levels as occupational groups,Interpersonal comparisons,Relative deprivation,Tax policy,Subsidization
    JEL: D11 H24 H30 J24
    Date: 2011
  3. By: Heuer, Nina
    Abstract: This paper tests the hypothesis of a beneficial brain drain using occupation-specific data on migration from developing countries to OECD countries around 2000. Distinguishing between several types of human capital allows to assess whether the impact of high-skilled south-north migration on human capital in the sending economies differed across occupational groups requiring tertiary education. We find a robust negative effect of the incidence of high-skilled emigration on the level of human capital in the sending countries, thereby rejecting the hypothesis of a beneficial brain drain. The negative effect was significantly stronger for professionals - the occupational category with the largest incidence of south-north migration and the highest educational requirements - than for technicians and associate professionals. --
    Keywords: International migration,Occupation-specific brain drain,Human capital,Transferability of skills,Beneficial brain drain
    JEL: F22 J24 O15
    Date: 2011
  4. By: Faisal Sultan Qadri, Faisal; Dr. Abdul Waheed, Waheed
    Abstract: Human capital is generally considered as a positive contributor in the economic growth. In this study, we estimate this relationship using time series data of Pakistan for the period 1978 to 2007. A health adjusted education indicator for human capital is used in the standard Cobb-Douglas production function confirms the long run positive relationship between human capital and the economic growth in Pakistan. A sensitivity analysis was also performed in order to check the robustness of the initial findings. The estimation results supported the findings of the previous studies that human capital is positively related to growth and also that the results are robust. The health adjusted education indicator was found to be a highly significant determinant of economic growth, which indicates that both the health and education sectors should be given special attention in order to ensure long run economic growth.
    Keywords: Human Capital; Economic Growth; Education and Health
    JEL: O47 E24 I18 I21
    Date: 2011
  5. By: Dominik Hanglberger; Joachim Merz (LEUPHANA University Lüneburg,Department of Economic, Behaviour and Law Sciences, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)))
    Abstract: Empirical analyses using cross-sectional and panel data found significantly higher levels of job satisfaction for self-employed than for employees. We argue that those estimates in previous studies might be biased by neglecting anticipation and adaptation effects. For testing we specify several models accounting for anticipation and adaptation to self-employment and job changes. Based on data from the German Socio-Economic Panel Survey (SOEP) we find that becoming self-employed is associated with large negative anticipation effects. In contrast to recent literature we find no specific long term effect of self-employment on job satisfaction. Accounting for anticipation and adaptation to job changes in general, which includes changes between employee jobs, reduces the effect of self-employment on job satisfaction by 70%. When controlling for anticipation and adaptation to job changes, we find no further anticipation effect of self-employment and a weak positive but not significant effect of self-employment on job satisfaction for three years. Thus adaptation wipes out higher satisfaction within the first three years being self-employed. According to our results previous studies at least overestimated possible positive effects of self-employment on job satisfaction.
    Keywords: job satisfaction, self-employment, hedonic treadmill model, adaptation, anticipation, fixed-effects panel estimations, German Socio-Economic Panel (SOEP)
    JEL: J23 J28 J81
    Date: 2011–03
  6. By: Nakabayashi, Masaki
    Abstract: Schooling, an observable signal, decreases its impact on wages as employers “publicly” learn workers’ hidden types over workers’ experience in the market. This symmetric employer learning hypothesis has been empirically contested by, first, asymmetry of incumbent and entrant employers, and second, larger-than-imagined complementarity between schooling and work experience, which could enshroud learning effect. Microanalysis of Japanese steel industry shows, 1) experience before entering the long-term employment is complementary to schooling, 2) employer learning effect dominates the complementarity effect after workers’ joining the long-term employment. It suggests that reported evidences of employer learning have in fact captured internal labor market effect.
    Keywords: employer learning, schooling and wages, internal labor market effect
    JEL: N35 J31 J24
    Date: 2011–04–29
  7. By: TAKII Katsuya
    Abstract: We construct a dynamic assignment model that explains persistent productivity differences between firms. Large expected organization capital (firm-specific knowledge) attracts skilled workers, who help to accumulate organization capital. Accumulated large organization capital leads to good performances, which, in turn, confirm high expectations. It is shown that the sluggish movement of expected productivity that occurs through this positive feedback can play a role similar to an unobserved fixed effect in the productivity dynamics. Our calibration exercises suggest that the proposed feedback accompanied by amplification mechanisms inherent in the assignment model can explain a major part of the observed persistence and disparity in productivity.
    Date: 2011–04
  8. By: Pfeifer, Christian (Leuphana University Lüneburg)
    Abstract: I use a question about works council relations from the 2006 wave of the IAB Establishment panel to analyze the heterogeneous effects of works councils on productivity, wages, and profits. The results indicate that the effects differ significantly between works council relationship types in a systematic pattern. The overall findings are in line with productivity-enhancing and rent-sharing functions of works councils.
    Keywords: industrial relations, firm performance, codetermination, works councils
    JEL: J53 M54
    Date: 2011–04
  9. By: Ahmed, Vaqar; Wahab, Mohammad Abdul; Mahmood, Hamid
    Abstract: Today South Asia is host to a large youth bulge which is entering the labor market every year posing challenging questions for the national governments in the context of employable skills, space for entrepreneurship, innovation and economic freedom. SME sector provides an opportunity for the young to exercise their ideas and ideals. However a prerequisite for the young to be innovate is the how countries produce and retain a high end human capital. This study provides a review of national socio-economic policies in South Asian region - which answer such challenges.
    Keywords: human resource development; small and medium enterprises; economic growth; competitiveness
    JEL: J08 J24
    Date: 2011–03–01
  10. By: Hyll, Walter; Stark, Oded
    Abstract: We analyze the impact on a firm's profits and optimal wage rates, and on the distribution of workers' earnings, when workers compare their earnings with those of co-workers. We consider a low-productivity worker who receives lower wage earnings than a high-productivity worker. When the low-productivity worker derives (dis)utility not only from his own effort but also from comparing his earnings with those of the high-productivity worker, his response to the sensing of relative deprivation is to increase the optimal level of effort. Consequently, the firm's profits are higher, its wage rates remain unchanged, and the distribution of earnings is compressed. --
    Keywords: Social comparisons,Heterogeneous workforce,Relative deprivation,Effort exertion,Earnings gap,Earnings compression
    JEL: D01 D21 J22 J24 J31 M54
    Date: 2011
  11. By: Thomas Dohmen (ROA, Maastricht University); Armin Falk (University of Bonn)
    Abstract: This paper studies the impact of incentives on worker self-selection in a controlled laboratory experiment. Subjects face the choice between a fixed and a variable payment scheme. Depending on the treatment, the variable payment is a piece rate, a tournament or a revenue-sharing scheme. We find that output is higher in the variable pay schemes (piece rate, tourna- ment, and revenue sharing) compared to the fixed payment scheme. This difference is largely driven by productivity sorting. In addition personal attitudes such as willingness to take risks and relative self-assessment as well as gender affect the sorting decision in a systematic way. Moreover, self-reported effort is significantly higher in all variable pay conditions than in the fixed wage condition. Our lab findings are supported by an additional analysis using data from a large and representative sample. In sum, our findings underline the importance of multi-dimensional sorting, i.e., the tendency for different incentive schemes to systematically attract people with different individual characteristics.
    Keywords: Relational Sorting, Incentives, Piece Rates, Tournament, Revenue-Sharing, Risk Preferences, Social Preferences, Gender, Experiment, Field Evidence
    JEL: J3 M52 C91 D81 J16
    Date: 2011–05
  12. By: Michele Battisti (University of Palermo); Giovanna Vallanti (LUISS "Guido Carli" University)
    Abstract: This paper focuses on the effects of decentralized wage schemes and temporary forms of employment on worker/firm performance. The effect of monetary incentives on worker effort and firm performance is a central topic in economics. According to the principal-agent paradigm, firms (the principal) have to link employees’ remuneration scheme to any verifiable indicator of performance in order to avoid opportunistic behaviours. The effectiveness of incentives on workers’ behaviour may vary significantly accordingly to the institutional/economic context in which the firms operate but in general the empirical evidence shows that financial incentives have the potential to exert strong effects on indicators of firm performance, such as productivity and worker absenteeism. Both from a theoretical and empirical point of view, the prediction on the effects of temporary forms of employment on effort and productivity is less neat. In light of these considerations, the aim of this paper is to provide further empirical evidence on whether and to what extent the performance related pay and the contract flexibility affect workers effort and in turn firm productivity for different type of workers (white collar vs. blue collar), working in workplaces characterized by different degree of uncertainty and risk and in firms operating in different economic and institutional settings using a sample of Italian firms. According to our results, wage flexibility appears to have a significant effect on effort and then on firm’s productivity and white collars are more responsive to monetary incentives than blue collars. Moreover, the presence of a large share of temporary contracts implies a lower dismissal probability for permanent workers and a deterioration in the working environment and then it reduces workers’ motivation and effort.
    Keywords: Productivity, Effort, Performance-related-pay, Temporary contracts.
    JEL: J22 J33 J38
    Date: 2011
  13. By: Martin Brown (Swiss National Bank and CenTER Tilburg University); Armin Falk (University of Bonn); Ernst Fehr (Institute for Empirical Research in Economics, University of Zurich)
    Abstract: When workers are faced with the threat of unemployment, their relationship with a particular firm becomes valuable. As a result, a worker may comply with the terms of a relational contract that demands high effort even when performance is not enforceable by a third party. But can relational contracts motivate high effort when workers can easily find alternative jobs? We examine how competition for labor affects the emergence of relational contracts and their effectiveness in overcoming moral hazard in the labor market. We show that effective relational contracts do emerge in a market with excess demand for labor. Long-term relationships turn out to be less frequent when there is excess demand for labor than they are in a market characterized by exogenous unemployment. However, stronger competition for labor does not impair labor market efficiency: higher wages induced by competition lead to higher effort out of concerns for reciprocity.
    Keywords: Relational Contracts, Involuntary Unemployment
    JEL: D82 J3 J41 E24 C9
    Date: 2011–05
  14. By: Johannes Abeler (University of Nottingham); Armin Falk (University of Bonn); Lorenz Goette (University of Lausanne); David Huffman (Swarthmore College)
    Abstract: A key open question for theories of reference-dependent preferences is what determines the reference point. One candidate is expectations: what people expect could affect how they feel about what actually occurs. In a real-effort experiment, we manipulate the rational expectations of subjects and check whether this manipulation influences their effort provision. We find that effort provision is significantly different between treatments in the way predicted by models of expectation-based reference-dependent preferences: if expectations are high, subjects work longer and earn more money than if expectations are low.
    Keywords: Reference Points, Expectations, Loss Aversion, Disappointment, Experiment
    JEL: C91 D01 D84 J22
    Date: 2011–05
  15. By: Dittrich, Dennis A. V.; Kocher, Martin G.
    Abstract: We present an experimental test of a shirking model where monitoring intensity is endogenous and effort a continuous variable. Wage level, monitoring intensity and consequently the desired enforceable effort level are jointly determined by the maximization problem of the firm. As a result, monitoring and pay should be complements. In our experiment, between and within treatment variation is qualitatively in line with the normative predictions of the model under standard assumptions. Yet, we also find evidence for reciprocal behavior. Our data analysis shows, however, that it does not pay for the employer to solely rely on the reciprocity of employees.
    Keywords: incentive contracts; supervision; efficiency wages;experiment; incomplete contracts; reciprocity
    JEL: C91 J31 J41
    Date: 2011–01
  16. By: Armin Falk (University of Bonn and IZA); David Huffman (Swarthmore College and IZA); W. Bentley Macleod (Columbia University and IZA)
    Abstract: We provide evidence on how two important types of institutions – dismissal barriers, and bonus pay – affect contract enforcement behavior in a market with incomplete contracts and repeated interactions. Dismissal barriers are shown to have a strong negative impact on worker performance, and market efficiency, by interfering with firms' use of firing threat as an incentive device. Dismissal barriers also distort the dynamics of worker effort levels over time, cause firms to rely more on the spot market for labor, and create a distribution of relationship lengths in the market that is more extreme, with more very short and more very long relationships. The introduction of a bonus pay option dramatically changes the market outcome. Firms are observed to substitute bonus pay for threat of firing as an incentive device, almost entirely offsetting the negative incentive and efficiency effects of dismissal barriers. Nevertheless, contract enforcement behavior remains fundamentally changed, because the option to pay bonuses causes firms to rely less on long-term relationships. Our results show that market outcomes are the result of a complex interplay between contract enforcement policies and the institutions in which they are embedded.
    Keywords: incomplete contracts, bonus pay, efficiency wages, employment protection, firing costs, experiment
    JEL: J41 J3 C9 D01
    Date: 2011–05
  17. By: Damien Échevin; Bernard Fortin
    Abstract: We provide an analysis of the effect of physician payment methods on their hospital patients’ length of stay and risk of readmission. To do so, we exploit a major reform implemented in Quebec (Canada) in 1999. The Quebec Government introduced an optional mixed compensation (MC) scheme for specialist physicians working in hospital. This scheme combines a fixed per diem with a reduced fee for services provided, as an alternative to the traditional feefor-service system. We develop a simple theoretical model of a physician’s decision to choose the MC scheme. We show that a physician who adopts this system will have incentives to increase his time per clinical service provided. We demonstrate that as long as this effect does not improve his patients’ health by more than a critical level, they will stay more days in hospital over the period. At the empirical level, using a large patient-level administrative panel data set from a major teaching hospital, we estimate a model of transition between spells in and out of hospital analog to a difference-in-differences method. The model is based on a two-state Mixed Proportional Hazard approach. We find that the hospital length of stay of patients treated in departments that opted for the MC system increased on average by 10.8% (0.71 days). However, the risk of readmission to the same department with the same diagnosis does not appear to be overall affected by the reform. <P>Cet article présente une analyse de l’impact du mode de rémunération des médecins spécialistes sur la durée de séjour de leurs patients à l’hôpital et sur leur risque de ré-hospitalisation. À cette fin, nous exploitons une réforme majeure mise en place au Québec en 1999. Le gouvernement du Québec a introduit un mode de rémunération mixte optionnel pour les spécialistes travaillant en établissement. Ce mode de paiement combine un per diem fixe et une rémunération à l’acte partielle, comme alternative à la rémunération à l’acte traditionnelle. Nous développons d’abord un simple modèle théorique de la décision du médecin de choisir ou non la rémunération mixte. Nous montrons qu’un médecin qui adhère à la rémunération mixte sera incité à accroître le temps qu’il consacre par acte. Nous démontrons que dans la mesure où cet effet n’améliore pas la santé du patient au-delà d’un certain niveau critique, ce dernier séjournera plus longtemps à l’hôpital au cours de la période. Au niveau empirique, à l’aide d’une vaste base de données longitudinales dénominalisées portant sur des patients du Centre Hospitalier de l’Université de Sherbrooke, nous estimons un modèle de durée à l’hôpital et hors hôpital analogue à une approche différence-en-différences. Notre méthode d’estimation se fonde sur un modèle de risque proportionnel mixte à deux états. Selon nos résultats, la durée de séjour des patients traités par des médecins qui ont passé à la rémunération mixte se serait accrue en moyenne de 10,8 % (0,71 jour). Cependant, le risque de ré-hospitalisation dans un même département avec le même diagnostic n’aurait pas été affecté par la réforme au niveau global.
    Keywords: Physician payment mechanisms, mixed compensation, hospital length of stay, risk of re-hospitalisation; duration model, natural experiment., Mécanismes de rémunération des médecins, rémunération mixte, durée du séjour à de l'hôpital de séjour, risque de re-hospitalisation.
    JEL: I10 I12 I18 C41
    Date: 2011–04–01

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