nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2012‒05‒22
fifteen papers chosen by
Tommaso Reggiani
Universita' di Bologna

  1. First-line Implementation of High-Performance Work Systems: Effects on Work Unit Human Capital, Empowerment, and Performance By N. SOENS; D. BUYENS; M. S. TAYLOR
  2. The Money Value of a Man By Mark Huggett; Greg Kaplan
  3. Lifetime Labor Supply and Human Capital Investments By Rodolfo Manuelli; Ananth Seshadri; Yongseok Shin
  4. Promotion without Commitment: Signaling, Time Inconsistency and Decentralization of the Firm By Junichiro Ishida
  5. Quick job entry or long-term human capital development? The dynamic effects of alternative training schemes By Aderonke Osikominu
  6. Incentive Design and Manager Performances: an ABM Approach By Concetta Sorropago
  7. Mutual Investment Employee-Organization Relationship: A Conceptual Model of How and When it is Functional By M. AUDENAERT; A. VANDERSTRAETEN; D. BUYENS
  8. Performance Pay and Ethnic Wage Differences in Britain By Colin Green; John S. Heywood; Nikolaos Theodoropoulos
  9. What explains the gender earnings gap in self-employment? A decomposition analysis with German data By Lechmann, Daniel S. J.; Schnabel, Claus
  10. Human capital for growth: possible steps towards an upgrade of the Italian education system By Piero Cipollone; Pasqualino Montanaro; Paolo Sestito
  11. Quit Behavior and the Role of Job Protection By Gielen, Anne C.; Tatsiramos, Konstantinos
  12. Temporary Employment, Job Flows and Productivity: A Tale of Two Reforms By Cappellari, Lorenzo; Dell'Aringa, Carlo; Leonardi, Marco
  13. Trustworthy by Convention By M. Bigoni; S. Bortolotti; M. Casari; D. Gambetta
  14. Reciprocity in the Principal Multiple Agent Model By Giuseppe De Marco; Giovanni Immordino
  15. Strategic Tournaments By Ayala Arad; Ariel Rubinstein

    Abstract: This study examines whether and how implementation of high-performance work systems (HPWS) by first-line managers relates to work unit performance. We hypothesized and tested a positive relationship between first-line managers’ implementation of HPWS and work unit performance, and we investigated cognitive (work unit human capital) and motivational (work unit empowerment) mechanisms through which this relationship occurs. Data were obtained from 135 employees of 62 Belgian branches of an employment agency and 10 middle managers overseeing these branches. Results revealed that first-line implementation of HPWS was positively related to work unit productivity and work unit customer service. Also, the relationship between first-line implementation of HPWS and work unit productivity was mediated by work unit human capital. These findings contribute to both theory and practice by providing an evidence-base of the proclaimed importance of first-line managers in establishing effective HPWS.
    Date: 2012–04
  2. By: Mark Huggett (Georgetown University); Greg Kaplan (University of Pennsylvania)
    Abstract: This paper posits a notion of the value of an individual's human capital and the associated return on human capital. These concepts are examined using U.S. data on male earnings and financial asset returns. We decompose the value of human capital into a bond, a stock and a residual value component. We find that (1) the bond component of human capital is larger than the stock component at all ages, (2) the value of human capital is far below the value implied by discounting earnings at the risk-free rate, (3) mean human capital returns exceed stock returns early in life and decline with age and (4) human capital returns and stock returns have a small positive correlation over the working lifetime.
    Keywords: Value of Human Capital, Return on Human Capital
    JEL: D91 E21 G12 J24
    Date: 2012–04
  3. By: Rodolfo Manuelli (Washington University in St. Louis and Federal Reserve Bank of St. Louis); Ananth Seshadri (University of Wisconsin--Madison); Yongseok Shin (Washington University in St. Louis and Federal Reserve Bank of St. Louis)
    Abstract: We develop a model of retirement and human capital investment to study the effects of tax and retirement policies. Workers choose the supply of raw labor (career length) and also the human capital embodied in their labor. Our model explains a significant fraction of the US-Europe difference in schooling and retirement. The model predicts that reforms of the European retirement policies modeled after the US can deliver 15-35 percent gains in per-worker output in the long run. Increased human capital investment in and out of school accounts for most of the gains, with relatively small changes in career length. JEL classification: E24; J24
    Keywords: Lifetime labor supply human capital
    JEL: E24 J24
  4. By: Junichiro Ishida
    Abstract: This paper explores the consequences and implications of the "dual role of promotion" in an environment where a firm must simultaneously achieve two distinct goals -- assignment and incentive provision -- via the strategic use of promotions. We argue that the efficient promotion rule is generally not implementable, as it necessarily entails time-inconsistent objectives: the firm is always tempted ex post to promote the worker with the highest upside potential rather than the one with the highest output. This ex post bias towards the assignment role of promotion leads to inefficient task choices where too many workers are induced to work on the difficult task to signal their productivities. The framework identifies the costs and benefits of decentralization, in relation to factors such as the levels of human and social capital, the degree of market competition, firm size, and distance to the technology frontier, and provides predictions that are in line with recent empirical evidence.
    Date: 2012–05
  5. By: Aderonke Osikominu
    Abstract: This paper investigates how precisely short-term, job-search oriented training programs as opposed to long-term, human capital intensive training programs work. We evaluate and compare their effects on time until job entry, stability of employment, and earnings. Further, we examine the heterogeneity of treatment effects according to the timing of training during unemployment as well as across different subgroups of participants. We find that participating in short-term training reduces the remaining time in unemployment and moderately increases job stability. Long-term training programs initially prolong the remaining time in unemployment, but once the scheduled program end is reached participants exit to employment at a much faster rate than without training. In addition, they benefit from substantially more stable employment spells and higher earnings. Overall, long-term training programs are well effective in supporting the occupational advancement of very heterogeneous groups of participants, including those with generally weak labor market prospects. However, from a fiscal perspective only the low-cost short-term training schemes are cost efficient in the short run.
    Keywords: Training, program evaluation, duration analysis, dynamic treatment effects, multiple treatments, active labor market policy
    JEL: J64 C41 J68 I28
    Date: 2012–05
  6. By: Concetta Sorropago (University of Roma "Tor vergata", Italy)
    Abstract: We present a simplified model to provide a virtual laboratory to test the effects of the use of different performance evaluation measures to design manager’s incentives in a project-based professional service organization. Our company’s owner has to cope with the scheduling of multiple resource constraint projects in real time (RCMPSP), and with the design of the production manager incentive, whose variable wage is tied to some measures of the performance, which are proxies of the original owner’s goal. We propose an agent based model approach where the agents’ intelligence lies in the choice of the scheduling sequences. A discrete event simulator (DES) executes the projects, allocating in real time, the limited resources available. A Genetic Algorithm, evolving the sequence, randomly generated, uses the DES to simulate the effect and ranks the solutions. In this way, we investigate the incentive alignment problem as a resource allocation problem, comparing the results deriving from their respective "good solutions".
    Keywords: Complex System Dynamics, Resource constrained multi project scheduling, Incentive Design, Performance Evaluation Measures, Genetic Algorithm
    JEL: C63 D23 L2 M12
    Date: 2012–05
    Abstract: A conceptual model is delineated on the process how and when Mutual Investment Employee-Organization Relationship (EOR), relative to other EOR forms, leads to employee reactions. Besides the widely used social exchange-based model that is used to explain this process, we build on theory to hypothesize that Mutual Investment EOR is also associated to improved employee reactions through an empowerment-based model. The social exchangebased model asserts that Mutual Investment EOR sends signals of valuing and caring for the employees, which leads to social exchange. As a result, the employees reciprocate their organizations by exhibiting improved employee reactions. The empowerment-based model holds that Mutual Investment EOR provides employees with feelings of empowerment, which results in improved employee reactions. Furthermore, the effectiveness of empowerment is hypothesized to be stronger than the effectiveness of social exchange in high-complexity jobs. The implications of the conceptual model are discussed.
    Keywords: Employee-organization relationships; mutual investment; social exchange; empowerment; job complexity
    Date: 2012–03
  8. By: Colin Green; John S. Heywood; Nikolaos Theodoropoulos
    Abstract: In the first study using British data, we show that the average wage advantage of holding a performance pay job is greater for minorities than that for Whites. This generates a smaller ethnic wage gap among performance pay jobs than among time rate jobs. Yet, this pattern is driven by those receiving bonuses not those receiving performance related pay and it is evident only for Asians and for those in managerial jobs. Moreover, it is partially driven by sorting in which the more able take bonus jobs. Nonetheless, the basic results persist with diminished magnitude in fixed effect estimates. These findings differ dramatically from those for United States in which bonuses appear to increase racial differentials especially at the top of the earnings distribution.
    Keywords: Performance Pay;Ethnic Earnings Differentials
    Date: 2012–05
  9. By: Lechmann, Daniel S. J.; Schnabel, Claus
    Abstract: Using a large data set for Germany, we show that both the raw and the unexplained gender earnings gap are higher in self-employment than in paid employment. Applying an Oaxaca-Blinder decomposition, more than a quarter of the difference in monthly self-employment earnings can be traced back to women working fewer hours than men. In contrast variables like family background, working time flexibility and career aspirations do not seem to contribute much to the gender earnings gap, suggesting that self-employed women do not earn less because they are seeking work-family balance rather than profits. Differences in human capital endowments account for another 13 percent of the gap but segregation does not contribute to the gender earnings gap in a robust way. -- Mit einem großen Datensatz für Deutschland zeigen wir, dass sowohl der gesamte geschlechtsspezifische Verdienstunterschied als auch dessen unerklärter Teil bei Selbständigen größer ausfallen als bei abhängig Beschäftigten. Gemäß einer Oaxaca-Blinder-Zerlegung ist über ein Viertel des Unterschieds im Monatsverdienst von Selbständigen darauf zurückzuführen, dass Frauen kürzere Arbeitszeiten haben als Männer. Dagegen scheinen Variablen wie Familienhintergrund, Arbeitszeitflexibilität und Karriereaspiration nicht substanziell zum Geschlechter-Verdienstdifferenzial beizutragen. Dies legt nahe, dass selbständige Frauen nicht deshalb weniger verdienen, weil sie eher an der Vereinbarkeit von Arbeit und Familie und weniger an Gewinnerzielung interessiert sind. Unterschiede in der Humankapitalausstattung erklären weitere 13 Prozent des Differenzials, doch Segregation spielt keine eindeutige Rolle.
    Keywords: earnings differential,entrepreneurship,gender pay gap,Germany,self-employed,self-employment
    JEL: J31 J71
    Date: 2012
  10. By: Piero Cipollone (World Bank); Pasqualino Montanaro (Bank of Italy); Paolo Sestito (Bank of Italy)
    Abstract: The problems of Italy’s education system mostly stem from its modus operandi and interactions with the expectations of families and students. The recent signs of improvement in Italian students’ proficiency, plausibly reflecting greater emphasis on rigour, could be reinforced by making schools more autonomous and accountable, including in matters of staff management, and with a nationwide programme of support for the schools in greatest difficulty. The cost savings obtained over the years should mostly be reinvested into the system, enhancing teachers’ professionalism. In higher education, the increasing supply of degree courses has not affected the typical problems of Italy’s public universities, which: still attract few researchers and students from abroad; are too undifferentiated and unspecialized; have a predominantly local teacher and student base. The renewal begun with the recent university reform, which has challenged the historically self-referential governance of the system, must stimulate more internal competition within the Italian university system with well-defined and stable rules to foster quality and reward merit, and it must also allow individual universities more autonomy so that a more differentiated supply structure can emerge.
    Keywords: human capital, school,; university
    JEL: I20 I21
    Date: 2012–04
  11. By: Gielen, Anne C. (IZA); Tatsiramos, Konstantinos (University of Leicester)
    Abstract: Job protection reduces job turnover by changing firms' hiring and firing decisions. Yet the effect of job protection on workers' quit decisions and post-quit outcomes is still unknown. We present the first evidence using individual panel data from 12 European countries, which differ both in worker turnover rates and in the level of job protection. We find that workers are less likely to quit their job in countries with more job protection, but conditional on quitting they receive higher wages. This evidence can be explained by increased mobility costs associated with higher expected risk of post-quit layoff and job mismatch.
    Keywords: institutions, employment protection, labor mobility, job satisfaction, wages
    JEL: J28 J62
    Date: 2012–05
  12. By: Cappellari, Lorenzo (Università Cattolica del Sacro Cuore); Dell'Aringa, Carlo (Università Cattolica del Sacro Cuore); Leonardi, Marco (University of Milan)
    Abstract: We investigate the effects of two reforms of temporary employment using panel data on Italian firms. We exploit variation in their implementation across regions and sectors for identification. Our results show that the reform of apprenticeship contracts increased job turnover and induced the substitution of external staff with firms' apprentices, with an overall productivity-enhancing effect. The reform of fixed-term contracts instead did not produce the intended results: it induced a substitution of temporary employees in favour of external staff and reduced capital intensity, generating productivity losses. We estimate substitution elasticities across various types of temporary contracts that are consistent with this interpretation.
    Keywords: employment contracts, productivity, institutional changes
    JEL: J24 J41
    Date: 2012–04
  13. By: M. Bigoni; S. Bortolotti; M. Casari; D. Gambetta
    Abstract: Social life offers innumerable instances in which trust relations involve multiple agents. In an experiment, we study a new setting called Collective Trust Game where there are multiple trustees, who may have an incentive to coordinate their actions. Trustworthiness has also a strategic motivation, and the trusters' decision depends upon their beliefs about the predominant convention with regard to trustworthiness. In this respect, the Collective Trust Games offers a richer pattern of behavior than dyadic games. We report that the levels of trustworthiness are almost thirty percentage points higher when strategic motivations are present rather than not. Higher levels of trustworthiness also led to higher levels of trust. Moreover, strategic motives appear as a major drive for trustees, comparable in size to positive reciprocity, and more important than concerns for equality.
    JEL: C92 C72 D03
    Date: 2012–05
  14. By: Giuseppe De Marco (Università di Napoli Parthenope and CSEF); Giovanni Immordino (Università di Salerno and CSEF)
    Abstract: This paper studies how incentives are affected by intention-based reciprocity preferences when the principal hires many agents. Our results describe the agents' psychological attitudes required to sustain a given strategy profile. We also show that hiring reciprocal agents to implement a first or a second-best contract will always benefit the principal if the strategy profile is symmetric. When instead the profile (first or second-best) is asymmetric the principal's best interest might be better served by self-interested agents. We conclude the paper by clarifying when symmetric profiles are most likely to arise.
    Keywords: reciprocity, many agents, psychological games
    JEL: C72 D03 D86
    Date: 2012–05–10
  15. By: Ayala Arad; Ariel Rubinstein
    Date: 2012–05–11

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.