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on Human Capital and Human Resource Management |
| By: | Bandiera, Oriana; Barankay, Iwan; Rasul, Imran |
| Abstract: | Many organizations rely on teamwork, and yet field evidence on the impacts of team-based incentives remains scarce. Compared to individual incentives, team incentives can affect productivity by changing both workers’ effort and team composition. We present evidence from a field experiment designed to evaluate the impact of rank incentives and tournaments on the productivity and composition of teams. Strengthening incentives, either through rankings or tournaments, makes workers more likely to form teams with others of similar ability instead of with their friends. Introducing rank incentives however reduces average productivity by 14%, whereas introducing a tournament increases it by 24%. Both effects are heterogeneous: rank incentives only reduce the productivity of teams at the bottom of the productivity distribution, and monetary prize tournaments only increase the productivity of teams at the top. We interpret these results through a theoretical framework that makes precise when the provision of team-based incentives crowds out the productivity enhancing effect of social connections under team production. |
| Keywords: | rank incentives; team-based incentives; teams; tournaments |
| JEL: | D23 J33 M52 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8776&r=hrm |
| By: | Stuetzer, Michael; Obschonka, Martin; Schmitt-Rodermund, Eva |
| Abstract: | This paper examines the effects and origins of balanced skills among nascent entrepreneurs. In a first step we apply Lazear’s jack-of-all-trades theory to investigate performance effects of a balanced skill set. Second, we investigate potential sources of balanced skills, thereby testing the investment hypothesis against the endowment hypothesis. Analyzing data on high-potential nascent projects, we find support for the notion that balanced skills are important for making progress in the venture creation process. Regarding the origins of balanced skills, the data support both hypotheses. In line with the investment hypothesis an early interest in an entrepreneurial career, prior managerial and entrepreneurial experience are significantly related with a more balanced skill set. Supporting the endowment hypothesis, an entrepreneurial personality profile indicating entrepreneurial talent is correlated with a balanced skill set. Our results thus hint at the need for theories on the origins of a balanced skill set that integrate both views. |
| Keywords: | Nascent entrepreneurship; balanced skills; human capital; new venture creation; entrepreneurship |
| JEL: | L26 J24 M13 |
| Date: | 2012–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:37524&r=hrm |
| By: | Wagner, Robert; Zwick, Thomas |
| Abstract: | This paper jointly analyses the consequences of adverse selection and signalling on entry wages of skilled employees. It uses German linked employer employee panel data (LIAB) and introduces a measure for relative productivity of skilled job applicants based on apprenticeship wages. It shows that post-apprenticeship employer changers are a negative selection from the training firms' point of view. Negative selection leads to lower average wages of employer changersin the first skilled job in comparison to stayers. Entry wages of employer changers are specifically reduced by high occupation and training firm retention rates. Additional training firm signals are high apprenticeship wages that signal a positive selection of apprenticeship applicants, works councils and establishment size. Finally, positive individual signals such as schooling background affect the skilled entry wages of employer changers positively. -- |
| Keywords: | entry wages,employer change,adverse selection,signalling |
| JEL: | J24 J31 J62 J63 M52 M53 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:12014&r=hrm |
| By: | Hazan, Moshe; Zoabi, Hosny |
| Abstract: | This paper provides a new explanation for the narrowing and reversal of the gender education gap. It highlights the indirect effect of returns to human capital on parents' preferences for sons and the resulting demand for children and education. We assume that parents maximize the full income of their children and that males have an additional income, independently of their level of education. This additional income has two effects. First, it biases parental preferences towards sons. Second, it implies that females have relative advantage in producing income through education. We show that when the relative returns to human capital are sufficiently low, the bias in parents' preferences towards sons is relatively high, so that parents who have daughters first have more children. Daughters are born to larger families and hence receive less education. As returns to human capital increase, gender differences in producing income diminish, parents' bias towards sons declines, variation in family size falls and the positive correlation between family size and the number of daughters is weakened. When returns to human capital are sufficiently high, the relative advantage of females in education dominates differences in family size, triggering the reversal in gender education gap. |
| Keywords: | Fertility; Gender Gender Educational Gap; Returns to Human Capital |
| JEL: | I21 J13 O11 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8885&r=hrm |
| By: | Auriol, Emmanuelle; Friebel, Guido; Lammers, Frauke |
| 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: | Incentives; Promotion hierarchies; Sorting; Status |
| JEL: | J3 L2 M5 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8831&r=hrm |
| By: | Diego Restuccia; Guillaume Vandenbroucke |
| Abstract: | An average person born in the United States in the second half of the nineteenth century completed 7 years of schooling and spent 58 hours a week working in the market. By contrast, an average person born at the end of the twentieth century completed 14 years of schooling and spent 40 hours a week working. In the span of 100 years, completed years of schooling doubled and working hours decreased by 30 percent. What explains these trends? We consider a model of human capital and labor supply to quantitatively assess the contribution of exogenous variations in productivity (wage) and life expectancy in accounting for the secular trends in educational attainment and hours of work. We find that the observed increase in wages and life expectancy account for 80 percent of the increase in years of schooling and 88 percent of the reduction in hours of work. Rising wages alone account for 75 percent of the increase in schooling and almost all the decrease in hours in the model, whereas rising life expectancy alone accounts for 25 percent of the increase in schooling and almost none of the decrease in hours of work. |
| Keywords: | Schooling, hours of work, productivity, life expectancy, trends, United States |
| JEL: | E1 I25 J11 O4 |
| Date: | 2012–03–21 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-450&r=hrm |
| By: | Acharya, Viral V; Pagano, Marco; Volpin, Paolo |
| Abstract: | We present a model of labor market equilibrium in which managers are risk-averse, managerial talent (‘alpha’) is scarce, and firms seek alpha, that is, compete for this talent. When managers are not mobile across firms, firms provide efficient long-term compensation, which allows for learning about managerial talent and insures low-quality managers. In contrast, when managers can move across firms, high-quality managers can fully extract the rents arising from their skill, which prevents firms from providing co-insurance among their employees. In anticipation, risk-averse managers may churn across firms before their performance is fully learnt and thereby prevent their efficient choice of projects. The result is excessive risk-taking with pay for short-term performance and build up of long-term risks. We conclude with analysis of policies to address the resulting inefficiency in firms' compensation. |
| Keywords: | executive compensation; managerial talent; managerial turnover; short-termism |
| JEL: | D62 G32 G38 J33 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8905&r=hrm |
| By: | Ashraf, Nava; Bandiera, Oriana; Jack, Kelsey |
| Abstract: | A substantial body of research investigates the design of incentives in firms, yet less is known about incentives in organizations that hire individuals to perform tasks with positive social spillovers. We conduct a field experiment in which agents hired by a public health organization are randomly allocated to four groups. Agents in the control group receive a standard volunteer contract often offered for this type of task, whereas agents in the three treatment groups receive small financial rewards, large financial rewards, and non-financial rewards, respectively. The analysis yields three main findings. First, non-financial rewards are more effective at eliciting effort than either financial rewards or the volunteer contract. The effect of financial rewards, both large and small, is much smaller and not significantly different from zero. Second, non-financial rewards elicit effort both by leveraging intrinsic motivation for the cause and by facilitating social comparison among agents. Third, contrary to existing laboratory evidence, financial incentives do not crowd out intrinsic motivation in this setting. |
| Keywords: | incentives; intrinsic motivation; non-monetary rewards |
| JEL: | D82 J33 M52 O15 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8834&r=hrm |
| By: | Aitor Lacuesta (Banco de España); Sergio Puente (Banco de España); Ernesto Villanueva (Banco de España) |
| Abstract: | The response of human capital accumulation to changes in the anticipated returns to schooling determines the type of skills supplied to the labor market, the productivity of future cohorts, and the evolution of inequality. Unlike the US, the UK or Germany, Spain has experienced since 1995 a drop in the returns to medium and tertiary education and, with a lag, a drop in schooling attainment of recent cohorts, providing the opportunity to estimate the response of different forms of human capital acquisition to relative increases in low-skill wages. We measure the expected returns to schooling using skill-specifi c wages bargained in collective agreements at the province-industry level. We argue that those wages are easily observable by youths and relatively insensitive to shifts in the supply of workers. Our preferred estimates suggest that a 10% increase in the ratio of wages of unskilled workers to the wages of mid-skill workers increases the fraction of males completing at most compulsory schooling by between 2 and 5 percentage points. The response is driven by males from less educated parents and comes at the expense of students from the academic high school track rather than the vocational training track. |
| Keywords: | Collective bargaining, human capital |
| JEL: | J52 J24 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1208&r=hrm |
| By: | Fitzenberger, Bernd; Leuschner, Ute |
| Abstract: | Academic careers in Germany have been under debate for a while. We conduct a survey among postdocs in Germany, to analyze the perceptions and attitudes of postdocs regarding their research incentives, their working conditions, and their career prospects. We conceptualize the career prospects of a postdoc in a life-cycle perspective of transitions from academic training to academic or non-academic jobs. Only about half of the postdocs sees strong incentives for academic research, but there is quite a strong confidence to succeed in an academic career. Furthermore, postdocs who attended a PhD program show better career prospects and higher research incentives compared to others. Academic career prospects and motivation are strongest for assistant professors. Apart from this small group, however, postdocs report only a small impact of the university reforms of the last decade. Female postdocs show significantly higher research incentives but otherwise we find little gender differences. Finally, good prospects in non-academic jobs are not associated with a reduction in the motivation for research. -- |
| Keywords: | Postdocs,Academic Career Prospects,Research Incentives,University Reforms |
| JEL: | A11 A29 I21 I23 J24 J49 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:12020&r=hrm |
| By: | Deininger, Klaus; Yadav, Vandana |
| Abstract: | We use data on inter-generational gains in educational attainment by some 500,000 individuals in 200 West Bengal villages to explore gender-differentiated impacts of land reform on human capital accumulation at the individual level. While there are significant gains (of about 0.3 years for males) in the immediate post-reform generation, their magnitude pales in comparison to second-generation effects of between 0.85 and 1.2 years that appear irrespectively of the land reform modality. Moreover, there are possibly significant spillover benefits on villagers who did not directly benefit from reform. Placebo tests and alternative specifications support robustness of the results. By contrast, levels of beneficiary productivity and welfare remain far below average, something that could likely be avoided if land reform beneficiaries would receive full ownership rights.rather than being recognized as permanent share tenants and if restrictions on transferability of land were abandoned. |
| Keywords: | India, land reform, long-term effects, human capital |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2011-82&r=hrm |
| By: | Burkart, Mike; Raff, Konrad |
| Abstract: | We propose that an active takeover market provides incentives by offering acquisition opportunities to successful managers. This allows firms to reduce performance-based compensation and can rationalize loss-making acquisitions. At the same time, takeovers remain a substitute for board dismissal in the replacement of poorly performing managers. The joint impact of the two mechanisms on managerial turnover is, however, multi-faceted: In firms with strong boards, turnover and performance-based pay are non-monotonic in the intensity of the takeover threat. In firms with weak boards, turnover (performance-based pay) increases (decreases) with the intensity of the takeover threat. When choosing its acquisition policy and the quality of its board, each firm ignores the adverse effect on other firms' acquisition opportunities and takeover threat. As a result, the takeover market is not sufficiently liquid and too few takeovers occur. |
| Keywords: | Board Interference; CEO Turnover; Compensation; Takeover |
| JEL: | G34 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8794&r=hrm |
| By: | Alessandro Bucciol (Department of Economics (University of Verona)); Marco Piovesan (Harvard Business School) |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:ver:wpaper:12/2012&r=hrm |
| By: | Cui, Victor; Ding, Waverly W.; Yanadori, Yoshio |
| Abstract: | Given the importance of exploration in a firm’s overall innovation program, scholars have sought to understand organizational factors that give rise to exploration-oriented innovations. We propose theory and empirical evidence that relates firms’ use of financial incentives to their exploratory innovation performance. We expect that a larger proportion of long-term incentives in R&D employee compensation should be positively associated with the creation of exploratory innovation in a firm. In addition, we propose that a higher level of horizontal pay dispersion is negatively associated with the creation of exploratory innovation. We examine innovations reflected in the patents of a unique six-year, unbalanced panel dataset of 94 high-technology firms in the U.S. Empirical results confirm that firms with high level of horizontal pay dispersion have less exploratory patent innovations. However, surprisingly, firms that pay their R&D employees a higher proportion of long-term financial incentives in total compensation have lower level of exploratory innovation. This implies the possibility that popular longterm incentive plans in high-technology sectors (e.g., stock option plans) have failed to achieve their intended goals in practice. We discuss factors that might moderate the negative impact of long-term incentives on exploratory innovation. |
| Keywords: | Organizational Behavior and Theory |
| Date: | 2011–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:indrel:qt2kq4b8qj&r=hrm |
| By: | Fabbri, Francesca; Marin, Dalia |
| Abstract: | The compensation of executive board members in Germany has become a highly controversial topic since Vodafone's hostile takeover of Mannesmann in 2000 and it is again in the spotlight since the outbreak of the financial crisis of 2009. Based on unique panel data evidence of the 500 largest firms in Germany in the period 1977-2009 we test two prominent hypothesis in the literature on executive pay: the manager power hypothesis and the efficient pay hypothesis. We find support for the manager power hypothesis for Germany as executives tend to be rewarded when the sector is doing well rather than the firm they work for. We reject, however, the efficient pay hypothesis as CEO pay and the demand for managers increases in Germany in difficult times when the typical firm size shrinks. We find further that domestic and global competition for managers has contributed to the rise in executive pay in Germany. Lastly, we show that CEOs in the banking sector are provided with incentives for performance and that the great recession of 2009 acted as a disciplining device on CEO pay in Germany. |
| Keywords: | CEO pay in banks; CEO pay in the financial crisis; domestic and global competition for managers; efficient pay hypothesis; manager power hypothesis |
| JEL: | F23 J3 M12 M52 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8879&r=hrm |
| By: | Hakenes, Hendrik; Schnabel, Isabel |
| Abstract: | This paper shows that bonus contracts may arise endogenously as a response to agency problems within banks, and analyzes how compensation schemes change in reaction to anticipated bail-outs. If there is a risk-shifting problem, bail-out expectations lead to steeper bonus schemes and even more risk-taking. If there is an effort problem, the compensation scheme becomes flatter and effort decreases. If both types of agency problems are present, a sufficiently large increase in bail-out perceptions makes it optimal for a welfare-maximizing regulator to impose caps on bank bonuses. In contrast, raising managers’ liability is counterproductive. |
| Keywords: | bank bail-outs; bank management compensation; bonus payments; limited and unlimited liability; risk-shifting; underinvestment |
| JEL: | G21 G28 J33 M52 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8852&r=hrm |
| By: | Barlo, Mehmet; Ayca, Ozdogan |
| Abstract: | This paper analyzes optimal contracts in a linear hidden-action model with normally distributed returns possessing two moments that are governed jointly by two agents, who can observe each others' effort levels and draft enforceable side-contracts on chosen effort levels and realized returns. After showing that standard constraints, resulting in incentive-contracts, may fail to ensure implementability, we examine (centralized) collusion-proof contracts and (decentralized) team-contracts. We prove that optimal team-contracts provide the highest implementable returns to the principal. In other words, the principal may restrict attention to outsourcing/decentralization without any loss of generality. Moreover, situations in which incentive-contracts are collusion-proof, thus implementable, are fully characterized. |
| Keywords: | Principal-agent problems; moral hazard; linear contracts; side--contracting; collusion; team; outsourcing; decentralization |
| JEL: | D82 M12 J30 |
| Date: | 2012–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:37449&r=hrm |
| By: | Jörg Baten; Johan Fourie |
| Abstract: | The lack of accurate measures of human capital formation often constrain investigations into the long-run determinants of growth and comparative economic development, especially in regions such as Africa. Using the reported age of criminals in the Courts of Justice records in the Cape Archive, this paper documents, for the first time, the levels of and trends in numeracy for inhabitants of the Cape Colony born between the seventeenth and early nineteenth centuries. Cape inhabitants included the native Khoe and San, European settlers, and imported slaves from other African regions and Asia. This hodgepodge of individuals allows a unique comparison between contemporaneous levels of 18th century development across three continents. By isolating those slaves born at the Cape, we also provide a glimpse into the dynamics of human capital transfer in colonial settings. |
| Keywords: | Education, Human Capital, South Africa, Whipple, Age-heaping, Africa, Asia |
| JEL: | N37 O15 I25 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:rza:wpaper:270&r=hrm |