nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2012‒10‒06
fourteen papers chosen by
Tommaso Reggiani
University of Cologne

  1. Mediocrity and induced reciprocity By Natalia Montinari; Antonio Nicolo; Regine Oexl
  2. Agency, Firm Growth and Managerial Turnover By Anderson, Ronald W.; Bustamante, Maria Cecilia; Guibaud, Stéphane
  3. Principal-Agent Settings with Random Shocks By Jared Rubin; Roman Sheremeta
  4. Human Capital Externalities and Employment Differences across Metropolitan Areas of the U.S. By Winters, John V.
  5. Are all High-Skilled Cohorts Created Equal? Unemployment, Gender, and Research Productivity By Conley, John P.; Önder, Ali Sina; Torgler, Benno
  6. Rewarding Idleness By Andrea Canidio; Thomas Gall
  7. Motivation crowding-out: Is there a risk for science? By Julien Pénin
  8. Does team telecommuting affect productivity? An experiment By E. Glenn Dutcher; Krista Jabs Saral
  9. Human Capital Quality and the Immigrant Wage Gap By Serge Coulombe; Gilles Grenier; Serge Nadeau
  10. The Production of Human Capital: Endowments, Investments and Fertility By Anna Aizer; Flávio Cunha
  11. Gender gaps in performance By Ghazala Azmat; Rosa Ferrer
  12. Are public sector employees overcompensated? By Alexander Danzer; Peter Dolton
  13. Teacher Quality Policy When Supply Matters By Jesse Rothstein
  14. Social preferences, accountability, and wage bargaining By Kocher, Martin G.; Poulsen, Odile; Zizzo, Daniel J.

  1. By: Natalia Montinari; Antonio Nicolo; Regine Oexl
    Abstract: We report evidence from an experiment where a principal chooses an agent out of two to perform a task for a fixed compensation. The principal's payoff depends on the agent's ex-ante ability and on a non-contractible effort that the agent has to exert once employed. We find that a significant share of principals select the mediocre agent (i.e. the one with the lower ex-ante ability). When the principal is allowed to send a message, mediocre agents exert more effort than agents with higher ability, and principals who choose mediocre agents on average have a larger payoff than principals who select agents with higher ability. This difference in effort overcompensates the difference in ability. Mediocre agents reciprocate more than agents who have ex-ante higher ability when the principals are able to make them feeling indebted.
    Keywords: reciprocity, communication, incentives, mediocrity
    JEL: C9
    Date: 2012–09
  2. By: Anderson, Ronald W.; Bustamante, Maria Cecilia; Guibaud, Stéphane
    Abstract: We study managerial incentive provision under moral hazard in a firm subject to stochastic growth opportunities. In our model, managers are dismissed after poor performance, but also when an alternative manager is more capable of growing the firm. The optimal contract may involve managerial entrenchment, such that growth opportunities are foregone after good performance. Firms with better growth prospects have higher managerial turnover and more front-loaded compensation. Firms may pay severance to incentivize their managers to report truthfully the arrival of growth opportunities. By ignoring the externality of the dismissal policy onto future managers, the optimal contract implies excessive retention.
    Keywords: agency; compensation policy; firm growth; managerial turnover; optimal contracting; severance pay
    JEL: G30 G35
    Date: 2012–09
  3. By: Jared Rubin (Argyros School of Business and Economics, Chapman University); Roman Sheremeta (Argyros School of Business and Economics, Chapman University)
    Abstract: Using a gift exchange experiment, we show that the ability of reciprocity to overcome incentive problems inherent in principal-agent settings is greatly reduced when the agent’s effort is distorted by random shocks and transmitted imperfectly to the principal. Specifically, we find that gift exchange contracts without shocks encourage effort and wages well above standard predictions. However, the introduction of random shocks reduces wages and effort, regardless of whether the shocks can be observed by the principal. Moreover, the introduction of shocks significantly reduces the probability of fulfilling the contract by the agent, the payoff of the principal, as well as total welfare.
    Keywords: gift exchange, principal-agent model, contract theory, reciprocity, effort, shocks, laboratory experiment
    JEL: C72 C91 D63 D81 H50
    Date: 2012
  4. By: Winters, John V. (University of Cincinnati)
    Abstract: It has been well documented that employment outcomes often differ considerably across areas. This paper examines the extent to which the local human capital level, measured as the share of prime age adults with a college degree, has positive external effects on labor force participation and employment for U.S. metropolitan area residents. The empirical results suggest that the local human capital level has positive externalities on the probability of labor force participation and employment for both women and men. We also find that less educated workers generally receive the largest external benefits.
    Keywords: employment, labor force participation, human capital externalities, agglomeration
    JEL: J21 J24 R23
    Date: 2012–09
  5. By: Conley, John P. (Vanderbilt University); Önder, Ali Sina (Department of Economics); Torgler, Benno (Queensland University of Technology and EBS Business School)
    Abstract: Using life cycle publication data of 9,368 economics PhD graduates from 127 U.S. institutions, we investigate how unemployment in the U.S. economy prior to starting graduate studies and at the time of entry into the academic job market affect economics PhD graduates’ research productivity. We analyze the period between 1987 and 1996 and find that favorable conditions at the time of academic job search have a positive effect on research productivity (measured in numbers of publications) for both male and female graduates. On the other hand, unfavorable employment conditions at the time of entry into graduate school affects female research productivity negatively, but male productivity positively. These findings are consistent with the notion that men and women differ in their perception of risk in high skill occupations. In the specific context of research-active occupations that require high skill and costly investment in human capital, an ex post poor return on undergraduate educational investment may cause women to opt for less risky and secure occupations while men seem more likely to “double down” on their investment in human capital. Further investigation, however, shows that additional factors may also be at work.
    Keywords: Research Productivity; Human Capital; Graduate Education; Gender Differences
    JEL: J16 J24
    Date: 2012–09–23
  6. By: Andrea Canidio; Thomas Gall
    Abstract: Market wages reflect expected productivity by using signals of past performance and past experience. These signals are generated at least partially on the job and create incentives for agents to choose high-profile and highly visible tasks. If agents have private information about the profitability of different tasks, firms may wish to prevent over- investment in visible tasks by increasing their opportunity costs. Firms can do so, for instance, by using employee perks. Heterogeneity in employee types induces substantial diversity in organizational and contractual choices, particularly regarding the extent to which conspicuous activities are tolerated or encouraged, the use of employee perks, and contingent wages
    Date: 2012–09–12
  7. By: Julien Pénin
    Abstract: Performance related pay is playing an increasing role in scientific research. This development, which applies the results of standard economic theories (the principal-agent model), aims at increasing incentives and thus productivity in science. The objective of this paper is then to cross the works of various economic fields, including those in economics of science and those on the theories of individual motivation, in order to explore the consequences of this development on scientists’ incentives and to focus on its possible "perverse effects". Two key elements emerge from our literature review: firstly, the motivations of researchers are complex and multiple and do not depend solely on their salary level; secondly, the literature on the theories of incentives identifies a risk that increasing monetary incentives, paradoxically, reduce the overall level of staff motivation, especially when there exist other sources of motivation (as is usually the case in science). According to this literature there may therefore exist a "hidden cost" to financially reward scientists. These teachings lead us to construct empirically testable propositions about the implications of performance related pay in science and the conditions of emergence of a motivation crowding-out effect.
    Keywords: science, merit pay, university, "motivation crowding-out", research, incentives.
    Date: 2012
  8. By: E. Glenn Dutcher; Krista Jabs Saral
    Abstract: Telecommuting policies have been increasingly adopted by employers. The benefits of telecommuting from the employer's perspective include direct cost-saving from not having to house employees in an office and indirect cost-saving through reduced turnover associated with increased employee satisfaction. The downside is the perceived opportunity for shirking outside of the traditional workplace, a problem which is potentially exacerbated if employees are placed into telecommuting teams. Using a controlled experiment which randomly assigned subjects to participate in the laboratory (non-telecommuters) or to participate online in a location of their choice (telecommuters), we directly test whether telecommuters are more likely to free ride when in teams and whether or not the locational composition of the team influences this outcome. We find no evidence of free-riding in teams for either telecommuters or non-telecommuters. We also find that variation in output when a worker is paired in a traditional team versus a telecommuting team can be attributed to the beliefs subjects have about their teammates' productivity. The last result leads directly to policy implications for managers.
    Keywords: Telecommuting, Team Production, Productivity, Virtual Teams, Economic Experiments
    JEL: J21 J24 J28 C90
    Date: 2012–09
  9. By: Serge Coulombe (Department of Economics, University of Ottawa, 120 University St., Ottawa,Ontario); Gilles Grenier (Department of Economics, University of Ottawa, 120 University St., Ottawa,Ontario); Serge Nadeau (Department of Economics, University of Ottawa, 120 University St., Ottawa,Ontario)
    Abstract: We propose a new methodology for analyzing determinants of the wage gap between immigrants and natives. A Mincerian regression framework is extended to include GDP per capita in an immigrant’s country of birth as a proxy for the quality of education and work experience acquired in that country. In this regard, a central finding is that Canadian immigrants’ returns to schooling and work experience significantly increase with the GDP per capita of their country of birth. The contribution of quality of schooling and work experience to the immigrant wage gap is also examined. It is shown that lower human capital quality completely negates the endowment advantage that immigrants have in the areas of schooling and work experience, so that this factor is key to understanding why they earn less than Canadian natives. Since data on GDP per capita are available for most countries in the world over long periods of time, the proposed methodology can be applied to analyze immigrant wage gaps for a large set of countries for which common statistics on natives and immigrants are available.
    Keywords: Wage differentials, immigrants vs. Canadian natives, human capital quality, immigration policies, work experience, education
    JEL: J20 J24 J15 J61
    Date: 2012
  10. By: Anna Aizer; Flávio Cunha
    Abstract: We study how endowments, investments and fertility interact to produce human capital in childhood. We begin by providing empirical support for two key features of existing models of human capital: that investments and existing human capital are complements in the production of later human capital (dynamic complementarity) and that parents invest more in children with higher endowments due to the complementarity between endowments and investments (static complementarity). For the former, we exploit an exogenous source of investment, the launch of Head Start in 1966, and estimate greater gains from preschool in the IQ of those with the highest stocks of early human capital, consistent with dynamic complementarity. For the latter, we are able to overcome the potential endogeneity and measurement error associated with traditional measures of endowment based on health at birth. When we do, we find that parents invest more in highly endowed children. Moreover, we find that the degree of reinforcement increases with family size. Thus, an increase in quantity leads not only to a decline in average quality (the quantity-quality tradeoff) but to an increase in the variation in quality, due to both greater variation in endowments (from more children) and greater reinforcing investments. These findings can be explained by extending the quantity-quality trade-off model to include heterogeneous child endowments and parental preferences that feature complementarity between quality and quantity and moderate aversion to inequality in child human capital within the household.
    JEL: I24 J13 J24
    Date: 2012–09
  11. By: Ghazala Azmat; Rosa Ferrer
    Abstract: Ghazala Azmat and Rosa Ferrer analyse data on young lawyers to understand what drives differences in earnings between highly skilled men and women.
    Keywords: performance measures, gender gaps, lawyers
    JEL: M52 J16 K40 J44
    Date: 2012–09
  12. By: Alexander Danzer; Peter Dolton
    Abstract: Alexander Danzer and Peter Dolton use the concept of 'total reward' to assess whether public sector pay and pensions are too high relative to the private sector.
    Keywords: Public sector, private sector, pay, pensions
    Date: 2012–09
  13. By: Jesse Rothstein
    Abstract: Recent proposals would strengthen the dependence of teacher pay and retention on performance, in order to attract those who will be effective teachers and repel those who will not. I model the teacher labor market, incorporating dynamic self-selection, noisy performance measurement, and Bayesian learning. Simulations indicate that labor market interactions are important to the evaluation of alternative teacher contracts. Typical bonus policies have very small effects on selection. Firing policies can have larger effects, if accompanied by substantial salary increases. However, misalignment between productivity and measured performance nearly eliminates the benefits while preserving most of the costs.
    JEL: I21 J33
    Date: 2012–09
  14. By: Kocher, Martin G.; Poulsen, Odile; Zizzo, Daniel J.
    Abstract: We assess the extent of preferences for employment in a collective wage bargaining situation with heterogeneous workers. We vary the size of the union and introduce a treatment mechanism transforming the voting game into an individual allocation task. Our results show that highly productive workers do not take employment of low productive workers into account when making wage proposals, regardless of whether insiders determine the wage or all workers. The level of pro-social preferences is small in the voting game, while it increases as the game is transformed into an individual allocation task. We interpret this as an accountability effect.
    Keywords: social preferences; wage bargaining; accountability; collective decision making
    JEL: C91 C92 D71 J51 J52
    Date: 2012–09

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