nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2012‒02‒27
sixteen papers chosen by
Tommaso Reggiani
Universita' di Bologna

  1. Job Allocation Rules and Sorting Efficiency: Experimental Outcomes in a Peter Principle Environment By David Dickinson; Marie-Claire Villeval
  2. Fiscal Policy Impacts on Growth: an OECD Cross-Country Study with an Emphasis on Human Capital Accumulation By Diego d'Andria; Giuseppe Mastromatteo
  3. The Happy Artist? An Empirical Application of the Work-Preference Model By Lasse Steiner; Lucian Schneider
  4. Modelling the Flow of Knowledge and Human Capital: A Framework of Innovative Capital By d'Artis Kancs; Pavel Ciaian
  5. Importance and influence of organizational changes on companies and their employees By Halkos, George
  6. The Relationship between the Level and Modality of HRM Metrics, Quality of HRM Practice and Organizational Performance By Nina Pološki Vokić
  7. Effects of birth order and sibling sex composition on human capital investment in children in India By Makino, Momoe
  8. The Firm as the Locus of Social Comparisons: Internal Labor Markets versus Up-or-Out By Auriol, Emmanuelle; Friebel, Guido; Lammers, Frauke
  9. Financial Development, Entrepreneurship, and Job Satisfaction By Milo Bianchi
  10. Are you a Good Employee or Simply a Good Guy? Infl?uence Costs and Contract Design. By Brice Corgnet; Ismael Rodriguez-Lara
  11. Management Practices Across Firms and Countries By Nicholas Bloom; Christos Genakos; Raffaella Sadun; John Van Reenen
  12. Age and gender composition of the workforce, productivity and profits: Evidence from a new type of data for German enterprises By Christian Pfeifer; Joachim Wagner
  13. Postgraduate Education and Human Capital Productivity in Japan By MORIKAWA Masayuki
  14. Peer Effects in Pro-Social Behavior: Social Norms or Social Preferences? By Gächter, Simon; Nosenzo, Daniele; Sefton, Martin
  15. Wellbeing in the workplace: the impact of modern management By Alex Bryson; Pekka Ilmakunnas
  16. Doing well and doing good: a multi-dimensional puzzle By Vanina Forget

  1. By: David Dickinson (Department of Economics - Appalachian State University); Marie-Claire Villeval (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon)
    Abstract: An important issue in personnel economics is the design of efficient job allocation rules. Firms often use promotions both to sort workers across jobs and to provide them with incentives. However, the Peter Principle states that employees' output tends to fall after a promotion. Lazear (2004) suggests that self-selection may improve job allocation efficiency while preserving incentive effects. We reproduce this Peter Principle in the laboratory and compare the efficiency of a promotion standard with subjects self-selecting their task. We find no evidence of effort distortion, as predicted by theory. Furthermore, we find that when the Peter Principle is not severe, promotion rules often dominate self-selection efficiency of task assignment. Results are consistent with imperfect appraisal of transitory ability and a lack of strategic behavior.
    Keywords: Promotion, Peter Principle, Sorting, Experiment
    Date: 2012
  2. By: Diego d'Andria (LUISS Guido Carli University, Rome); Giuseppe Mastromatteo (Università Cattolica del Sacro Cuore, Milan)
    Abstract: A growing body of literature tests the effects of different tax structures on long-run economic growth. We argue that these tests do not properly account for endogeneity between supposedly independent variables. We run several cross-country ordinary least squares tests with special attention to human capital, and show how education choice behaviors are affected by different tax mixes. The results obtained by microeconomic theory are validated, and they imply that accumulation rates of human capital cannot be deemed independent from savings taxation. Our results also show that more progressive labor taxation does not appear to be correlated with lower investments in education, contrary to what one would expect from microeconomic theory. We discuss possible implications, and suggest that a likely explanation lies in the outcome of redistribution policies reducing credit constraints of poorer households, thus allowing them easier access to education and, consequently, higher aggregate human capital accumulation.
    Keywords: tax mix, human capital, growth, cross-country
    JEL: H21 E24 O4 C23
    Date: 2012–01–18
  3. By: Lasse Steiner; Lucian Schneider
    Abstract: The artistic labor market is marked by several adversities, such as low wages, above-average unemployment, and constrained underemployment. Nevertheless, it attracts many young people. The number of students exceeds the available jobs by far. A potential explanation for this puzzle is that artistic work might result in exceptionally high job satisfaction, a conjecture that has been mentioned at various times in the literature. We conduct the first direct empirical investigation of artists’ job satisfaction. The analysis is based on panel data from the German Socio-Economic Panel Survey (SOEP). Artists on average are found to be considerably more satisfied with their work than non-artists, a finding that corroborates the conjectures in the literature. Differences in income, working hours, and personality cannot account for the observed difference in job satisfaction. Partially, but not fully, the higher job satisfaction can be attributed to the higher self-employment rate among artists. Suggestive evidence is found that superior “procedural” characteristics of artistic work, such as increased variety and on-the-job learning, contribute to the difference in job satisfaction.
    Keywords: job satisfaction, artists, work-preference, cultural economics
    JEL: Z10 J24 J28 J31
    Date: 2012
  4. By: d'Artis Kancs; Pavel Ciaian
    Abstract: Recently, the EU Council adopted a new labour migration policy instrument - the EU Blue Cards (BC) - for attracting the highly skilled workers to the EU. The present paper examines the potential impacts, which BC may cause on less developed sending countries (LDC). Our results suggest that the EU BC will reduce human capital in LDC. In addition, BC will also have a negative impact on knowledge capital. These findings suggest that without appropriate policy responses, BC makes developing country growth prospects rather bleak than blue. Therefore, we propose and analyse alternative migration policy instruments for LDC. We find that policies implemented on the demand side of the skilled labour market are the most efficient. In contrast, policies that address the supply side of the skilled labour market are the least efficient, though they might be less costly to implement.
    Keywords: Knowledge capital, human capital, high-skill migration, innovative capital, economic growth.
    JEL: F02 F22 J24 J61 O15
    Date: 2011–12–12
  5. By: Halkos, George
    Abstract: The timely and continuing adaptation of companies to the rapid changes in the market is a prerequisite to survival and growth. Simultaneously, the smooth adaptation of employees to changes contributes not only to the improved running of organizations but also to their personal improvement and enhanced satisfaction. The need for change requires the adaptability of organizations and enterprises, the redesigning of the organizational models, continuing reconstruction, learning processes and employees training. In this study we investigate the effects of organizational change, the reactions of employees and the results of change management on productivity. For this purpose a random sample of 355 employees in the private and public sectors and two stage cluster sampling is first used to collect primary data. Logistic Regression is used to explore many useful and supportive elements concerning the function of changes on stress and productivity. We find that change leads to increased stress but when the necessity and utility of change is understood it then leads to increased productivity. The good relations between leadership and employees offer the latter considerable advantages as well as a feeling of security. Once the change is announced, there is a negative effect on productivity and job satisfaction declines. When the change begins to work, we have increased productivity and reduced stress.
    Keywords: Organizational changes; stress; productivity; logistic regression
    JEL: J08 J81 J01 M12 M54 M50
    Date: 2012–01
  6. By: Nina Pološki Vokić
    Abstract: The paper explores the relationship between the way organizations measure HRM and overall quality of HRM activities, as well as the relationship between HRM metrics used and financial performance of an organization. In the theoretical part of the paper modalities of HRM metrics are grouped into five groups (evaluating HRM using accounting principles, evaluating HRM using management techniques, evaluating individual HRM activities, aggregate evaluation of HRM, and evaluating HRM department). In the empirical part of the paper researched concepts are assessed through questionnaires distributed to Croatian organizations with more than 500 employees. Respondents (HRM managers) provided information about HRM metrics their organizations use, overall quality of HRM practice, and financial performance of their organizations. Based on the acquired data, relationships between modality of HRM metrics, quality of HRM and organizational performance are explored.
    Keywords: HRM metrics, HRM evaluation, HRM quality, organizational performance, Croatia
    JEL: M12 M5
    Date: 2011–12–01
  7. By: Makino, Momoe
    Abstract: The paper explores the effects of birth order and sibling sex composition on human capital investment in children in India using the Indian Human Development Survey (IHDS). Endogeneity of fertility is addressed using instruments and controlling for household fixed effects. Family size effect is also distinguished from the sibling sex composition effect. Previous literature has often failed to take endogeneity into account and shows a negative birth order effect for girls in India. Once endogeneity of fertility is addressed, there is no evidence for a negative birth order effect or sibling sex composition effect for girls. Results show that boys are worse off in households that have a higher proportion of boys specifically when they have older brothers.
    Keywords: India, Fertility, Family planning, Household, Birth order, Sibling sex composition, Household resource allocation
    JEL: J13 J16 O12 O53
    Date: 2012–01
  8. By: Auriol, Emmanuelle (Toulouse School of Economics); Friebel, Guido (Goethe University Frankfurt); Lammers, Frauke (University of Bern)
    Abstract: We suggest a parsimonious dynamic agency model in which workers have status concerns. A firm is a promotion hierarchy in which a worker's status depends on past performance. We investigate the optimality of two types of promotion hierarchies: (i) internal labor markets, in which agents have a job guarantee, and (ii) "up-or-out", in which agents are fired when unsuccessful. We show that up-or-out is optimal if success is difficult to achieve. When success is less hard to achieve, an internal labor market is optimal provided the payoffs associated with success are moderate. Otherwise, up-or-out is, again, optimal. These results are in line with observations from academia, law firms, investment banks and top consulting firms. Here, up-or-out dominates, while internal labor markets dominate where work is less demanding or payoffs are more compressed, for instance, because the environment is less competitive. We present some supporting evidence from academia, comparing US with French economics departments.
    Keywords: status, promotion hierarchies, incentives, sorting
    JEL: J3 M5 L2
    Date: 2012–02
  9. By: Milo Bianchi (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine)
    Abstract: This paper shows that utility differences between the self-employed and employees increase with financial development. This effect is not explained by increased profits but by an increased value of non-monetary benefits, in particular job independence. We interpret these findings by building a simple occupational choice model in which financial constraints may impede the creation of firms and depress labor demand, thereby pushing some individuals into self-employment for lack of salaried jobs. In this setting, financial development favors a better matching between individual motivation and occupation, thereby increasing entrepreneurial utility despite increasing competition and so reducing profits.
    Keywords: Financial development; entrepreneurship; job satisfaction
    Date: 2012
  10. By: Brice Corgnet (Economic Science Institute, Chapman University); Ismael Rodriguez-Lara (Dpto. Analisis Economico, Universidad de Valencia, ERICES)
    Abstract: We develop a principal-agent model with a moral hazard problem in which the principal has access to a hard signal (the level of output) and a soft signal (the supervision signal) about the agent?s level of effort. We show that the agent?'s ability to manipulate the soft signal increases the cost of implementing the effcient equilibrium, leading to wage compression when the infl?uence cost is privately incurred by the agent. When manipulation activities negatively affect the agent?s productivity through the level of output, the design of infl?uence-free contracts that deter manipulation may lead to high-powered incentives. This result implies that high-productivity workers face incentive schemes that are more sensitive to hard evidence than those faced by their low-productivity counterparts. In that context, the principal will tolerate infl?uence for low-productivity workers but not for high-productivity workers. We also fi?nd that in the case of productivity-based costs, it may be optimal for the principal not to supervise the agent, even if supervision is costless.
    Keywords: principal-agent model with supervision, contract design, in?uence activities, manipulation, productivity-based in?uence costs, power of incentives
    JEL: D23 D82
    Date: 2012
  11. By: Nicholas Bloom; Christos Genakos; Raffaella Sadun; John Van Reenen
    Abstract: For the last decade we have been using double-blind survey techniques and randomized sampling to construct management data on over 10,000 organizations across twenty countries. On average, we find that in manufacturing American, Japanese, and German firms are the best managed. Firms in developing countries, such as Brazil, China and India tend to be poorly managed. American retail firms and hospitals are also well managed by international standards, although American schools are worse managed than those in several other developed countries. We also find substantial variation in management practices across organizations in every country and every sector, mirroring the heterogeneity in the spread of performance in these sectors. One factor linked to this variation is ownership. Government, family, and founder owned firms are usually poorly managed, while multinational, dispersed shareholder and private-equity owned firms are typically well managed. Stronger product market competition and higher worker skills are associated with better management practices. Less regulated labor markets are associated with improvements in incentive management practices such as performance based promotion.
    JEL: M1
    Date: 2012–02
  12. By: Christian Pfeifer (Leuphana University Lueneburg, Germany); Joachim Wagner (Leuphana University Lüneburg, Germany)
    Abstract: This empirical paper documents the relationship between composition of a firm's workforce (with a special focus on age and gender) and its performance (productivity and profitability) for a large representative sample of enterprises from manufacturing industries in Germany. We use unique newly available data that for the first time combine information from the statistics of employees covered by social security that is aggregated at the enterprise level and information from enterprise level surveys performed by the Statistical Offices. Our microeconometric analysis confirms previous findings of concave age-productivity profiles, which are consistent with human capital theory, and adds a new finding of a rather negative effect of age on firms' profitability, which is consistent with deferred compensation considerations. Moreover, our analysis reveals for the first time that the ceteris paribus lower level of productivity in firms with a higher share of female employees does not go hand in hand with a lower level of profitability in these firms. If anything, profitability is (slightly) higher in firms with a larger share of female employees. This finding might indicate that lower productivity of women is (over)compensated by lower wage costs for women, which might be driven by general labor market discrimination against women.
    Keywords: Ageing, firm performance, gender, productivity, profitability, Germany
    JEL: D22 D24 J21 J24 L25
    Date: 2012–02
  13. By: MORIKAWA Masayuki
    Abstract: In advanced countries, including Japan, the number of workers with postgraduate degrees is increasing. These highly educated workers are important contributors to innovation. This paper, using published data from the Employment Status Survey, estimates standard wage functions to investigate the effects of postgraduate degree on productivity and the rate of return on postgraduate education. According to the analysis, wage premium for postgraduates relative to undergraduates is about 20% in Japan, which is comparable to the figures found in the United States and the United Kingdom. The premium is larger for female employees. Wage reduction after age 60 is smaller, and retirement age is higher for workers with postgraduate education. Considering the trend toward advanced technology and the growing demand for human capital, postgraduate education is becoming important to vitalize the Japanese economy. At the same time, expansion of postgraduate education may contribute to narrowing the wage gap between male and female workers and increasing labor force participation of elderly people.
    Date: 2012–02
  14. By: Gächter, Simon (University of Nottingham); Nosenzo, Daniele (University of Nottingham); Sefton, Martin (University of Nottingham)
    Abstract: We compare social preference and social norm based explanations for peer effects in a three-person gift-exchange game experiment. In the experiment a principal pays a wage to each of two agents, who then make effort choices sequentially. In our baseline treatment we observe that the second agent's effort is influenced by the effort choice of the first agent, even though there are no material spillovers between agents. This peer effect is predicted by a model of distributional social preferences (Fehr-Schmidt, 1999). As we show from a norms-elicitation experiment, it is also consistent with social norms compliance. A conditional logit investigation of the explanatory power of payoff inequality and elicited norms finds that the second agent's effort can be best explained by the social preferences model. In further treatments with modified games we find that the presence/strength of peer effects changes as predicted by the social preferences model. As with the baseline treatment, a conditional logit analysis favors an explanation based on social preferences, rather than social norms following for these treatments. Our results suggest that, in our context, the social preferences model provides a parsimonious explanation for the observed peer effect.
    Keywords: peer effects, social influence, gift-exchange, experiment, social preferences, inequity aversion, measuring social norms
    JEL: A13 C92 D03
    Date: 2012–02
  15. By: Alex Bryson; Pekka Ilmakunnas
    Abstract: How people feel about their jobs is an important part of their overall happiness yet until now, few studies have explored the links between employees' wellbeing and their working environment. Alex Bryson and colleagues analyse data from Finland to assess the impact of modern management practices on wellbeing in the workplace.
    Keywords: wellbeing, management practices
    Date: 2012–02
  16. By: Vanina Forget (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, AgroParisTech - ENGREF)
    Abstract: This paper sheds new light on the much debated issue of how corporations can do well and do good by focusing on the multidimensional nature of corporate social responsibility and acknowledging model uncertainty. Model averaging, a formal statistical framework which explicitly accounts for specification uncertainty, is introduced in the literature and applied to a unique database matching the economic and environmental and social performance of 461 large European firms. Hereby the composition of profitability-linked corporate social responsibility is unveiled and reveals the importance of good business behavior with customers and suppliers. Strong and novel support is also brought to the coexistence of corporate policies monotonically related to economic performance (human resources) and policies with optimal level (environment), hence reconciling competing theories. Implications for business and further research are discussed.
    Keywords: corporate social responsibility; firm performance; model averaging;model uncertainty; multidimensionality.
    Date: 2012–02–20

This nep-hrm issue is ©2012 by Tommaso Reggiani. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.