nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2011‒09‒05
eighteen papers chosen by
Tommaso Reggiani
Universita' di Bologna

  1. Whither Human Capital? The Woeful Tale of Transition to Tertiary Education in India By Sumon Bhaumik; Manisha Chakrabarty
  2. The Effect of Variable Pay Schemes on Workplace Absenteeism By Pouliakas, Konstantinos; Theodoropoulos, Nikolaos
  3. Scarring Effects of Remaining Unemployed for Long-Term Unemployed School-Leavers By Cockx, Bart; Picchio, Matteo
  4. Wage Dispersion and Labor Turnover with Adverse Selection By Carrillo-Tudela, Carlos; Kaas, Leo
  5. Information Aggregation, Investment, and Managerial Incentives By Elias Albagli; Christian Hellwig; Aleh Tsyvinski
  6. Recursive Contracts, Firm Longevity, and Rat Races: Theory and Experimental Evidence By Peter Bardsley; Nisvan Erkal; Nikos Nikiforakis; Tom Wilkening
  7. The networks of the solo self-employed and their success By Sierdjan Koster; Nardo de Vries
  8. Real Effort, Real Leisure and Real-time Supervision: Incentives and Peer Pressure in Virtual Organizations. By Brice Corgnet; Roberto Hernán-González; Stephen Rassenti
  9. Does It Pay to Be Productive? The Case of Age Groups By Cataldi, Alessandra; Kampelmann, Stephan; Rycx, Francois
  10. Incentive pay and gender gaps in the Nordic countries By Westling, Tatu
  11. Gender Gaps across Countries and Skills: Supply, Demand and the Industry Structure By Olivetti, Claudia; Petrongolo, Barbara
  12. The Effect of Providing Peer Information on Retirement Savings Decisions By John Beshears; James J. Choi; David Laibson; Brigitte C. Madrian; Katherine L. Milkman
  13. Does Ambiguity Aversion Raise the Optimal Level of Effort? A Two-Period Model By Loïc Berger
  14. Desert and Inequity Averson in Teams By David Gill; Rebecca Stone
  15. Teacher Pension Systems, the Composition of the Teaching Workforce, and Teacher Quality By Cory Koedel
  16. Individual Voice in Employment Relationships: A Comparison Under Different Forms of Workplace Representation By David Marsden
  17. A Detailed Analysis of the Productivity Performance of the Canadian Food Manufacturing Subsector By Chris Ross
  18. The Impact of Pay Increases on Nurses' Labour Market: A Review of Evidence from Four OECD Countries By James Buchan; Steven Black

  1. By: Sumon Bhaumik; Manisha Chakrabarty
    Abstract: In this paper we examine the issue of high dropout rates in India which has adverse implications for human capital formation, and hence for the country’s long term growth potential. Using the 2004-05 National Sample Survey employment-unemployment survey data, we estimate transition probabilities of moving from a number of different educational levels to higher educational levels using a sequential logit model. Our results suggest that the overall probability of reaching tertiary education is very low. Further, even by the woeful overall standards, women are significantly worse-off, particularly in rural areas.
    Keywords: Education; Transitional probability; India
    JEL: I21
    Date: 2011–07–01
  2. By: Pouliakas, Konstantinos (European Centre for the Development of Vocational Training (Cedefop)); Theodoropoulos, Nikolaos (University of Cyprus)
    Abstract: We estimate the effect of variable pay schemes on workplace absenteeism using two cross sections of British establishments. Private sector establishments that explicitly link pay with individual performance are found to have significantly lower absence rates. This effect is stronger for establishments that offer variable pay schemes to a greater share of their non-managerial workforce. Matched employer-employee data suggest that the effect is robust to a number of sensitivity tests. We also find that firms that tie a greater proportion of employees’ earnings to variable pay schemes are also found to experience lower absence rates. Further, quintile regression results suggest that variable pay schemes have a stronger effect on establishments with an absence rate that is higher than an average or “sustainable” level. Finally, panel data suggest that a feedback mechanism is present, whereby high absenteeism in the past is related to a greater future incidence of individual variable pay schemes, which, in turn, is correlated with lower absence rates.
    Keywords: performance-related pay, absenteeism, incentives, Britain
    JEL: J22 J33 C21
    Date: 2011–08
  3. By: Cockx, Bart (Ghent University); Picchio, Matteo (Tilburg University)
    Abstract: This study investigates whether and to what extent further unemployment experience for youths who are already long-term unemployed imposes a penalty on subsequent labor market outcomes. We propose a flexible method for analyzing the effect on wages aside of transitions from unemployment and employment within a multivariate duration model that controls for selection on observables and unobservables. We find that prolonging unemployment drastically decreases the chances of finding employment, but hardly affects the quality of subsequent employment. The analysis suggests that negative duration dependence in the job finding rate is induced by negative signaling and not by human capital depreciation.
    Keywords: scarring effect of unemployment duration, employment quality, wage in multivariate duration model, selectivity
    JEL: C33 C41 J62 J64
    Date: 2011–08
  4. By: Carrillo-Tudela, Carlos (University of Essex); Kaas, Leo (University of Konstanz)
    Abstract: We consider a model of on-the-job search where firms offer long-term wage contracts to workers of different ability. Firms do not observe worker ability upon hiring but learn it gradually over time. With sufficiently strong information frictions, low-wage firms offer separating contracts and hire all types of workers in equilibrium, whereas high-wage firms offer pooling contracts designed to retain high-ability workers only. Low-ability workers have higher turnover rates, they are more often employed in low-wage firms and face an earnings distribution with a higher frictional component. Furthermore, positive sorting obtains in equilibrium.
    Keywords: adverse selection, on-the-job search, wage dispersion, sorting
    JEL: D82 J63 J64
    Date: 2011–08
  5. By: Elias Albagli; Christian Hellwig; Aleh Tsyvinski
    Date: 2011–08–25
  6. By: Peter Bardsley; Nisvan Erkal; Nikos Nikiforakis; Tom Wilkening
    Abstract: This paper investigates the relationship between firm longevity and rat races in an environment where long-lived firms are operated by overlapping generations of short-lived players. We first present a complete information model in which workers in the young generation are offered employment contracts designed by the firms' owners who belong to the old generation. When old, employed workers are granted ownnership rights as long as the firm continues to operate. We test the theoretical predictions of the model in a laboratory experiment. In line with our model's predictions, as firm longevity increases, the recursive nature of the contracts leads to a rat race characterized by low wages, high effort levels, and rent dissipation
    Keywords: Overlapping-generations models; Recursive contracts; Rat races; Experiments
    JEL: C91 D02 D21 D86 D92
    Date: 2011
  7. By: Sierdjan Koster; Nardo de Vries
    Abstract: An increasing proportion of the Dutch labour market is formed by the solo selfemployed (i.e. one person enterprises, mainly offering their own human capital). Knowledge on solo self-employed is still limited and this makes tailoring policy measures towards this group difficult. Their network position may play a crucial role in economic performance of solo self-employed, as resources available are by definition limited. They are likely to depend heavily on their professional networks for acquisition and mobilizing additional resources. In this paper we use a specially constructed panel of solo self-employed from the Netherlands to explore the motives, gestation and spatial extent of their networks. (Multinomial) logit models are used to relate network position to their economic performance. The results suggest that the motives for and gestation of cooperation between solo self-employed differ from other groups of entrepreneurs. In contrast to existing ideas about network benefits, information sharing and knowledge spill-overs are not an important motive for solo self-employed. Rather, they focus on executing jobs and joint acquisition. Finally, we find that in terms of success a good network position is negatively related to economic performance. In more detail, cooperation on scope is connected to success, whereas joined acquisition is related to poor performing solo self-employed. It seems that solo self-employed reach out to their colleagues when business is slow.  
    Date: 2011–08–29
  8. By: Brice Corgnet (Economic Science Institute, Chapman University); Roberto Hernán-González (Economic Science Institute, Chapman University); Stephen Rassenti (Economic Science Institute, Chapman University)
    Abstract: We propose a novel approach to the analysis of organizations by developing a computerized platform that reproduces relevant features of existing organizations such as real-effort tasks and real-leisure alternative activities (Internet). In this environment, we find strong incentives effects as organizations using individual incentives significantly outperform those relying on team incentives. Combining real-time peer monitoring with team incentives, we report striking evidence of positive peer effects as production increases by 50% and Internet usage decreases by 54% compared with organizations using team incentives alone. Peer monitoring allows virtual organizations using team incentives to perform as well as those using individual incentives. However, the positive effect of peer monitoring does not apply to low performers.
    Keywords: team incentives, free-riding, monitoring, peer pressure, virtual organization
    JEL: C9 D23 J0 J41
    Date: 2011
  9. By: Cataldi, Alessandra (Sapienza University of Rome); Kampelmann, Stephan (University of Lille 1); Rycx, Francois (Free University of Brussels)
    Abstract: Using longitudinal matched employer-employee data for the period 1999-2006, we investigate the relationship between age, wage and productivity in the Belgian private sector. More precisely, we examine how changes in the proportions of young (16-29 years), middle-aged (30-49 years) and older (more than 49 years) workers affect the productivity of firms and test for the presence of productivity-wage gaps. Results (robust to various potential econometric issues, including unobserved firm heterogeneity, endogeneity and state dependence) suggest that workers older than 49 are significantly less productive than prime age and young workers. In contrast, the productivity of middle-age workers is not found to be significantly different compared to young workers. Findings further indicate that average hourly wages within firms increase significantly and monotonically with age. Overall, this leads to the conclusion that young workers are paid below their marginal productivity while older workers appear to be "overpaid" and lends empirical support to theories of deferred compensation over the life-cycle (Lazear, 1979).
    Keywords: wages, productivity, aging, matched panel data
    JEL: J14 J24 J31
    Date: 2011–08
  10. By: Westling, Tatu
    Abstract: This paper explores the effect of incentive pay on gender pay gaps in Finland, Norway and Sweden among professionals and managers within MNCs. Mercer 2009 Total Remuneration Survey data is utilised. Uniform job ladder, occupation, industry and wage definitions enable consistent cross-country comparisons. In addition to the between-country variation, the within-country variation of gender gap with respect to incentive pay is analysed. The results indicate that gender pay gaps differ among the Nordics and that occupation and industry controls have dissimilar effects across countries. Irrespective of wage element, Finland and Norway are characterised by higher gender gaps than Sweden. Incentives tend to accentuate gender pay gaps. In intention to alleviate the absence of job performance data, this study utilises a rudimentary, promotion-based measure for job performance. In Finland it does affect the gender gap. However, irrespective of gender, high-performers are penalised in Sweden but not in Finland or Norway. The Finnish data also allows the identification of low-performers. Low job performance is rewarded in Finland. Nonetheless, the job performance findings should be interpreted with cautions.
    Keywords: Wage differential; incentive pay; job ladder; gender; job performance
    JEL: J31 J70
    Date: 2011–08–31
  11. By: Olivetti, Claudia (Boston University); Petrongolo, Barbara (London School of Economics)
    Abstract: The gender wage gap varies widely across countries and across skill groups within countries. Interestingly, there is a positive cross-country correlation between the unskilled-to-skilled gender wage gap and the corresponding gap in hours worked. Based on a canonical supply and demand framework, this positive correlation would reveal the presence of net demand forces shaping gender differences in labor market outcomes across skills and countries. We use a simple multi-sector framework to illustrate how differences in labor demand for different inputs can be driven by both within-industry and between-industry factors. The main idea is that, if the service sector is more developed in the US than in continental Europe, and unskilled women tend to be over-represented in this sector, we expect unskilled women to suffer a relatively large wage and/or employment penalty in the latter than in the former. We find that, overall, the between-industry component of labor demand explains more than half of the total variation in labor demand between the US and the majority of countries in our sample, as well as one-third of the correlation between wage and hours gaps. The between-industry component is relatively more important in countries where the relative demand for unskilled females is lowest.
    Keywords: gender gaps, education, demand and supply, industry structure
    JEL: E24 J16 J31
    Date: 2011–08
  12. By: John Beshears; James J. Choi; David Laibson; Brigitte C. Madrian; Katherine L. Milkman
    Abstract: We measure how receiving information about coworkers’ savings behavior affects recipients’ savings choices. Employees of a large company who were not participating in or contributing little to the company’s retirement savings plan were sent a simplified enrollment or contribution rate increase form. A randomized subset of forms included information on the fraction of coworkers either participating in or contributing at least 6% of pay to the plan. We find that peer information increased savings of non-unionized recipients but decreased savings of unionized recipients. Our results highlight the possibilities and limitations of peer information interventions.
    JEL: D14 D83 D91
    Date: 2011–08
  13. By: Loïc Berger
    Abstract: I consider two-period self-insurance and self-protection models in the presence of ambiguity that either affects the loss or the probabilities, and analyze the effect of ambiguity aversion. I show that in most common situations, ambiguity prudence is a sufficient condition to observe an increase in the level of effort. I proposes an interpretation of the model in the context of climate change, such that self-insurance and self-protection are respectively seen as adaptation and mitigation efforts a policymaker should provide to deal with an uncertain catastrophic event, and interpret the results obtained as an expression of the Precautionary Principle.
    Keywords: non-expected utility; self-protection; self-insurance; ambiguity prudence; precautionary principle
    JEL: D61 D81 D91 Q58
    Date: 2011–08
  14. By: David Gill; Rebecca Stone
    Abstract: Teams are becoming increasingly important in work settings. We develop a framework to study the strategic implications of a meritocratic notion of desert under which team members care about receiving what they feel they deserve. Team members find it painful to receive less than their perceived entitlement, while receiving more may induce pleasure or pain depending on whether preferences exhibit desert elation or desert guilt. Our notion of desert generalizes distributional concern models to situations in which effort choices affect the distribution perceived to be fair; in particular, desert nests inequity aversion over money net of effort costs as a special case. When identical teammates share output equally, desert guilt generates a continuum of symmetric equilibria. Equilibrium effort can lie above or below the level in the absence of desert, so desert guilt generates behavior consistent with both positive and negative reciprocity and may underpin social norms of cooperation.
    Keywords: Desert, deservingness, equity, inequity aversion, loss aversion, reference-dependence preferences, guilt, reciprocity, social norms, team production
    JEL: D63 J33
    Date: 2011
  15. By: Cory Koedel (Department of Economics, University of Missouri-Columbia; Department of Economics, University of Missouri-Columbia)
    Abstract: Teacher pension systems impose large penalties on individuals who separate too soon or remain employed too long. The penalties result in the retention of some teachers who would otherwise choose to leave, and the premature exit of some teachers who would otherwise choose to stay. We examine how these compositional effects of teacher pension systems influence the quality of the teaching workforce, conditional on individuals who initially select into teaching. We find no evidence that the pull and push incentives raise teacher quality, and if anything, we find modest negative effects. Our results support future experimentation with compensation schemes for educators that are not so heavily backloaded.
    Keywords: Educator Pensions, Teacher Pensions, Backloaded Compensation, Teacher Pensions and Teacher Quality, Teacher Compensation, Selection into Teaching
    JEL: I20 J30 J45
    Date: 2011–08–31
  16. By: David Marsden
    Abstract: This article considers the role of individual employee voice in regulating the 'zone of acceptance' within the employment relationship, and examines the extent to which different models of collective voice inhibit or foster the operation of individual voice. It focuses especially on the role of representatives who deal with job-level grievances who operate within contrasted frameworks of collective voice. In one, representation is negotiated with the employer, and in the other, it is based on rights established in employment law. The former is commonly associated with shop stewards and unions, and the latter with employee delegates and works councils. It is argued that whereas in the negotiated model individual and collective voice are substitutes, in the rights-based one they are complements. The article also considers how this may alter under dual-channel representation based on both unions and councils, which is very common in European workplaces. Britain provides an example of the negotiated model, and France of both the rights-based and dual-channel models. These ideas are tested using data from the 2004 British and French workplace employment relations surveys, and confirmed using data from the 1998 surveys.
    Keywords: Labor-management relations, industrial jurisprudence, individual and collective voice, works councils
    JEL: J53
    Date: 2011–08
  17. By: Chris Ross
    Abstract: This report analyzes labour productivity, multifactor productivity and input trends in Canadian food manufacturing since 1961, with a focus on the entire time period and developments since 2000. It is found that the subsector experienced labour productivity growth stronger than the business sector over both the long and short term, but has outperformed manufacturing only in the more recent period. Labour productivity growth is decomposed into capital intensity and multifactor productivity growth, which are found to have contributed to growth almost equally, and labour composition growth accounted for less than 15 per cent over the 1961-2007 period. Underlying drivers of growth are identified and trends in technology, capacity utilization, human capital, economies of scale, machinery and equipment, international trade, and regulation are explored. Policy implications for fostering labour productivity growth based on the drivers are outlined. Finally, a conclusion summarizes the key findings of the paper.
    Keywords: labour productivity, multifactor productivity, input trends, food manufacturing, capital intensity, multifactor productivity growth, labour composition
    JEL: O47 D24 J24 L66 Q18
    Date: 2011–08
  18. By: James Buchan; Steven Black
    Abstract: Nurses are usually the most numerous professionals in the healthcare workforce, and their contribution is a core component in attaining the policy objectives of improved productivity, quality of care and effectiveness in the health sector. The recent global economic crisis, and its related impacts on health sector funding and health labour market dynamics, has reinforced these policy priorities. This report reviews the impact of pay increases on nurses’ labour market indicators. It presents background data on trends in the numbers of nurses and the remuneration of nurses in OECD countries; summarises the limited evidence base on pay and labour market behaviour; reports on four case study countries where a significant pay raise was awarded to at least some categories of nurses in recent years in response to perceived labour market challenges – the United Kingdom (UK), New Zealand, Finland and the Czech Republic – using a variety of indicators to illustrate impact; and concludes with key points for policy makers. There has been variable growth in nurses’ employment levels in OECD countries in recent years, and nurses’ pay rates, in comparison to other earnings in national economies, vary markedly across OECD countries. The country case studies in this report highlight that there were several main drivers for the implementation of a pay rise for nurses, and also identified a range of possible indicators that can be used to assess the impact of changes to nurses’ pay. The main impetus for a pay increase came from: labour market concerns (geographic or specialty shortages), which were reported in all four countries; pay equity issues (New Zealand and the UK); structural changes in the pay systems (e.g., increased flexibility) (Finland, New Zealand and the UK); attempts to improve organizational productivity and the quality of care (UK); and improving international pay competitiveness (Czech Republic after EU accession). The review concludes by arguing that how nurses are paid - as well as how much they are paid – is an issue worthy of more detailed examination. While the same policy drivers exist in most OECD countries, nurses’ pay systems are very different. The findings suggest that, in the short term at least, the pay increases in the four countries contributed to an increase in the potential “new” supply of entrants to nurse education; the effect on those already in work is more difficult to assess, as their behaviour is also impacted by the complex interaction of other aspects, such as working environment and working conditions, career possibilities, and individuals' priorities.<BR>Le personnel infirmier est habituellement la catégorie la plus nombreuse des professionnels de santé, et leur contribution joue un rôle essentiel dans l’atteinte des objectifs d’amélioration de la productivité, de la qualité des soins et de l’efficacité dans le secteur de la santé. La crise économique mondiale récente, et ses impacts sur le financement des dépenses de santé et sur la dynamique du marché du travail dans ce secteur, est venue renforcer ces objectifs. Ce rapport examine l’impact des augmentations de salaire sur les indicateurs du marché du travail du personnel infirmier. Il présente des données de base sur les tendances concernant le nombre d’infirmières et leur rémunération dans les pays de l’OCDE ; résume les résultats des travaux de recherche disponibles sur les liens entre la rémunération des infirmières et les comportements sur le marché du travail ; présente de façon plus détaillée quatre études de cas de pays (Royaume-Uni, Nouvelle-Zélande, Finlande et République tchèque) où des augmentations significatives de salaire ont été octroyées à au moins certaines catégories d’infirmières et analyse l’impact de ces augmentations en utilisant différents indicateurs ; et conclut par quelques points clés à l’attention des décideurs politiques. La croissance de l’emploi du personnel infirmier a été variable au cours des dernières années dans les pays de l’OCDE, et les salaires des infirmières, en comparaison avec le salaire moyen dans chacun des pays, varient fortement d’un pays à l’autre, Les études de cas présentées dans ce rapport mettent en évidence plusieurs facteurs ayant entraîné une augmentation significative des salaires des infirmières dans les quatre pays en question, et identifient une série d’indicateurs susceptibles d’être utilisés pour mesurer l’impact de ces augmentations. Les principaux moteurs de ces augmentations de salaire sont venus : d’inquiétudes concernant le marché du travail dans les quatre pays (des pénuries sur le plan géographique ou au niveau de certaines spécialités) ; de questions entourant l’équité salariale (Nouvelle-Zélande et Royaume-Uni) ; des changements structurels dans les systèmes de paiements, notamment la mise en place d’une plus grande flexibilité (Finlande, Nouvelle- Zélande et Royaume-Uni) ; de tentatives d’amélioration de la productivité et de la qualité des soins (Royaume-Uni) ; et de l’amélioration de la compétitivité internationale des salaires (République tchèque après son entrée dans l’UE). Une des conclusions de ce rapport est que non seulement le niveau moyen de rémunération des infirmières mais aussi les méthodes de paiement mériteraient des études plus approfondies. Ces méthodes de paiement varient fortement d’un pays à l’autre alors que les mêmes défis se posent dans la plupart des pays. Les résultats des études de cas suggèrent qu’au moins à court terme, les augmentations de salaire des infirmières dans les quatre pays ont contribué à accroitre le nombre de personnes intéressées à étudier et travailler dans ce domaine. Il est toutefois difficile d’évaluer l’impact que ces augmentations ont eu sur les infirmières déjà sur le marché du travail, étant donné que leur comportement est aussi affecté par de nombreux facteurs tel que l’environnement et les conditions de travail ainsi que les priorités individuelles.
    JEL: I10 I18 J2
    Date: 2011–08–30

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