nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2012‒11‒11
twenty papers chosen by
Tommaso Reggiani
University of Cologne

  1. Determinants of Compensation in the Financial Services Industry By Patrick Kampkoetter
  2. Goals (th)at Work – Goals, Monetary Incentives, and Workers’ Performance By Sebastian Goerg; Sebastian Kube
  3. Moral Hazard in Hierarchies and Soft Information By Angelucci, Charles; Russo, Antonio
  4. Do Women Avoid Salary Negotiations? Evidence from a Large Scale Natural Field Experiment By Andreas Leibbrandt; John A. List
  5. Discretion, Productivity, and Work Satisfaction By Bartling, Björn; Fehr, Ernst; Schmidt, Klaus M.
  6. Managerial compensation contracts in quantity-setting duopoly By Iván Barreda-Tarrazona; Nikolaos Georgantzís; Constantine Manasakis; Evangelos Mitrokostas; Emmanuel Petrakis
  7. How Green is my Firm? Workers' Attitudes towards Job, Job Involvement and Effort in Environmentally-Related Firms By Joseph Lanfranchi; Sanja Pekovic
  8. Self-Evaluations and Performance: Evidence from Adolescence By Himmler, Oliver; Koenig, Tobias
  9. Gender Differences in Competitive and Non Competitive Environments: An Experimental Evidence By David Masclet; Emmanuel Peterle; Sophie Larribeau
  10. Job Search, Human Capital and Wage Inequality By Carrillo-Tudela, Carlos
  11. A Global Assessment of Human Capital Mobility: the Role of non-OECD Destinations By Frédéric DOCQUIER; Çağlar ÖZDEN; Christopher PARSONS; Ehran ARTUC
  12. The Impact of Education and Occupation on Temporary and Permanent Work Incapacity By Datta Gupta, Nabanita; Lau, Daniel; Pozzoli, Dario
  14. The Impact of Education and Occupation on Temporary and Permanent Work Incapacity By Nabanita Datta Gupta; Daniel Lau; Dario Pozzoli
  15. Negative Reciprocity and Retrenched Pension Rights By Montizaan, Raymond; Cörvers, Frank; de Grip, Andries; Dohmen, Thomas
  16. Early and Late Human Capital Investments, Borrowing Constraints, and the Family By Lance Lochner; Elizabeth Caucutt
  17. Bringing Work Back In Islamic Ethic By Possumah, Bayu Taufiq; Ismail, Abdul Ghafar; Shahida , Shahimi
  18. How IT can contribute to Human Affairs By Weiss, Kurt
  19. Promotion Determinants in Corporate Hierarchies: An Examination of Fast Tracks and Functional Area By Belzil, Christian; Bognanno, Michael L.; Poinas, François
  20. A Theory of Ex Post Inefficient Renegotiation By Herweg, Fabian; Schmidt, Klaus M.

  1. By: Patrick Kampkoetter (University of Cologne)
    Abstract: We provide an extensive overview of the determinants of the fixed and variable compensation schemes in the German and Swiss financial services industry. We find that the financial crisis had a deep impact on the proportion of variable pay to fixed salary; this impact was caused by large individual bonus cuts. The results also show that fixed compensation packages are highly standardized between banks, whereas bonus payments are more strongly related to differences between individuals. In Germany, bonuses vary to a higher extent across companies, whereas in Swiss banks, the differences are almost negligible when adding firm controls.
    Keywords: compensation, wage, bonus payments, financial crisis
    JEL: D22 J31 J33 M52
    Date: 2012–07–09
  2. By: Sebastian Goerg (Florida State University, Department of Economics); Sebastian Kube (University of Bonn, Department of Economics)
    Abstract: In a randomized field experiment, we investigate the connection between work goals, monetary incentives, and work performance. Employees are observed in a natural work environment where they have to do a simple, but effort-intense task. Output is perfectly observable and workers are paid for performance. While a regular piece-rate contract serves as a benchmark, in some treatments workers are paid a bonus conditional on reaching a pre-specified goal. We observe that the use of personal work goals leads to a significant output increase. The positive effect of goals not only prevails if they are self-chosen by the workers, but also if goals are set exogenously by the principal – although in the latter case, the exact size of the goal plays a crucial role. Strikingly, the positive effect of self-chosen goals persists even if the goal is not backed up by monetary incentives. We propose a novel incentive contract where – through the choice of a personal work goal – workers themselves determine the risk and the size of their bonus payment at the same time.
    Keywords: Field experiment, Goal setting, monetary incentives, bonus payments, pay-for-performance contracts, workplace behavior
    JEL: J33 C93 D01 A12 M52 D03 D24 J24
    Date: 2012–10
  3. By: Angelucci, Charles (Harvard University); Russo, Antonio (Doctorant TSE)
    Abstract: We investigate the scope for supervisory activities in organizations in which information is non-verifiable and opportunism severe. A principal-supervisor-agent hierarchy is considered. Side-contracts between supervisor and agent may be reached both before and after the agent has chosen his hidden action. We find that the supervisor is useful if and only if appointed before the agent has chosen his action. We also show that delegation of payroll authority is suboptimal. Finally, some insights concerning the optimal design of verification activities are provided: when information is non-verifiable, the supervisor should be employed as a monitor rather than as an auditor.
    Keywords: collusion, extortion, delegation, mechanism design
    Date: 2012–10
  4. By: Andreas Leibbrandt; John A. List
    Abstract: One explanation advanced for the persistent gender pay differences in labor markets is that women avoid salary negotiations. By using a natural field experiment that randomizes nearly 2,500 job-seekers into jobs that vary important details of the labor contract, we are able to observe both the nature of sorting and the extent of salary negotiations. We observe interesting data patterns. For example, we find that when there is no explicit statement that wages are negotiable, men are more likely to negotiate than women. However, when we explicitly mention the possibility that wages are negotiable, this difference disappears, and even tends to reverse. In terms of sorting, we find that men in contrast to women prefer job environments where the ‘rules of wage determination’ are ambiguous. This leads to the gender gap being much more pronounced in jobs that leave negotiation of wage ambiguous.
    JEL: C93 J0
    Date: 2012–11
  5. By: Bartling, Björn; Fehr, Ernst; Schmidt, Klaus M.
    Abstract: In Bartling, Fehr and Schmidt (2012) we show theoretically and experimentally that it is optimal to grant discretion to workers if (i) discretion increases productivity, (ii) workers can be screened by past performance, (iii) some workers reciprocate high wages with high effort and (iv) employers pay high wages leaving rents to their workers. In this paper we show experimentally that the productivity increase due to discretion is not only sufficient but also necessary for the optimality of granting discretion to workers. Furthermore, we report representative survey evidence on the impact of discretion on workers’ welfare, confirming that workers earn rents.
    JEL: M5 J3
    Date: 2012–10
  6. By: Iván Barreda-Tarrazona (LEE & Economics Department, Universitat Jaume I, Castellón, Spain); Nikolaos Georgantzís (GLOBE & Economics Department, University of Granada, Spain; LEE & Economics Department, Universitat Jaume I, Castellón-Spain; University of Portsmouth); Constantine Manasakis (University of Crete); Evangelos Mitrokostas (University of Portsmouth); Emmanuel Petrakis (University of Crete)
    Abstract: In the context of a quantity setting duopoly we experimentally test the ability of managerial compensation schemes to provide a commitment device leading to a more aggressive behavior in the product market. In line with our model, Relative Performance-based rewards are chosen more frequently than Profit-Revenue ones. Furthermore, output reacts to the contract terms in the expected way, although it tends to exceed the predicted levels. Other quantitative aspects of the model receive less support, especially because firm owners tend to use more balanced weights for their managers' induced objectives than the theory predicts. Overall, quantity setting behavior is more aggressive than the theory predicts.
    Keywords: Experimental economics; Oligopoly theory; Managerial delegation; Endogenous contracts
    JEL: D43 L21
    Date: 2012
  7. By: Joseph Lanfranchi (LEM - Laboratoire d'Économie Moderne - Université Paris II - Panthéon-Assas : EA4442, CEE - Centre d'études de l'emploi - Ministère de l'Enseignement supérieur et Recherche - Ministère du Travail, de l'Emploi et de la Santé); Sanja Pekovic (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine, DMSP - Université Paris IX - Paris Dauphine)
    Abstract: The implementation of environmental standards can be facilitated by motivating workers with pro-social preferences. Therefore, we study if employees working for firms achieving registration for environmental-related standards are more likely to display positive attitudes toward their job, to be actively involved in their jobs and to donate effort. Using a French matched employer-employee database, we find that these "green employees" report a significantly higher feeling of usefulness and equitable recognition at work. Besides, they are more likely to work uncompensated overtime hours. Finally, if the adoption of environmental standards is shown to have no direct influence on job involvement, we expose how it indirectly impacts job involvement through the mediation of employees' feeling of usefulness and equitable recognition at work.
    Keywords: environmental-related standards; pro-social motivation; workers' attitudes and behavior.
    Date: 2012–10
  8. By: Himmler, Oliver; Koenig, Tobias
    Abstract: A positive view of the self is often portrayed as a valuable asset in the sense that it can have performance enhancing properties. Using data on self-esteem - the most fundamental manifestation of positive self evaluations - and high school grade point averages of American students we produce results in line with this idea and find a positive link between favorable self-evaluations and higher levels of educational performance. However, when we exploit exogenous variation in self-esteem due to adolescent skin problems in order to account for the possible endogeneity of self-esteem, this finding is reversed and we obtain a negative effect on performance. We discuss mechanisms that may generate such an adverse causal effect of positive self-evaluations, and conclude that self-esteem and effort need not always be complements but can actually be substitutes.
    Keywords: Self-evaluations, Self-esteem, Non-cognitive Skills, Human Capital, Performance
    JEL: I2 J24
    Date: 2012–10
  9. By: David Masclet (University of Rennes1 - CREM UMR CNRS 6211, France and CIRANO, Montréal, Canada); Emmanuel Peterle (University of Rennes 1 - CREM UMR CNRS 6211, France); Sophie Larribeau (University of Rennes 1 - CREM UMR CNRS 6211, France)
    Abstract: We present a new experimental design that permits us to explore gender differences in both performance and compensation choice. We design a game in which participants are asked to choose between a flat wage and a tournament scheme and to perform under each scheme. Our data indicate that men and women of similar ability differ in both performance and compensation choice. Men are more likely to choose a tournament than a flat wage scheme. These findings reflect both higher women (men)‟s concerns for equality (competitive preferences) and stronger men‟s overconfidence. Our data also indicate significant gender differences in effort provision. Men increase significantly more their effort than women when moving from a flat wage to a tournament. More surprisingly, our data show that women provide significantly more effort than men under a flat wage scheme despite the absence of any penalty for shirking and the fastidious and boring dimension of the task. This gender gap remains highly significant after controlling for several individual and social preferences. As such, we believe that an interpretation in terms of gender differences in intrinsic motivation is the most consistent with all of our experimental findings.
    Keywords: PME, Experiment, Gender differences, Tournament Scheme, Flat Wage Scheme
    JEL: C91 J16 J31 M52
    Date: 2012–07
  10. By: Carrillo-Tudela, Carlos (University of Essex)
    Abstract: The objective of this paper is to construct and quantitatively assess an equilibrium search model with on-the-job search and general human capital accumulation. In the model workers enter the labour market with different abilities and firms differ in their productivities. Wages are dispersed because of search frictions and workers' productivity differentials. The model generates a simple (log) wage variance decomposition that is used to measure the importance of firm and worker productivity differentials, frictional wage dispersion and workers' sorting dynamics. I calibrate the model using a sample of young workers for the UK. I show that wage inequality among low skilled workers is mostly due to differences in their productivities. Among medium skilled workers frictional wage dispersion and sorting dynamics are, together, as important as workers' productivity differentials. Differences in firms' productivities are also an important source of wage inequality for both skill groups and account for a large share of frictional wage dispersion. Quantitatively the model is able to reproduce the observed cross-sectional wage distribution, the average wage-experience profile and the amount of frictional wage dispersion observed in the data as measured by the Mean-min ratio.
    Keywords: job search, human capital accumulation, wage dispersion, turnover
    JEL: J63 J64 J41 J42
    Date: 2012–10
  11. By: Frédéric DOCQUIER (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and FNRS); Çağlar ÖZDEN (World Bank); Christopher PARSONS (University of Oxford); Ehran ARTUC (World Bank)
    Abstract: The discourse concerning the mobility of human capital internationally typically evokes migratory patterns from poorer to relatively more wealthy countries and this focus is strongly reflected in the (brain drain) literature. This emphasis omits an important and as yet understudied aspect of the phenomena however, namely skill transfer to non-OECD and in particular, emerging nations. This paper contributes to the literature by first developing a new dataset of international bilateral migration stocks by gender and education level, which includes both OECD and non-OECD countries as destinations in 1990 and 2000. We then use pseudo-gravity model regressions to impute missing values where data are unavailable, such that we are able to provide, for the first time, a global assessment of human capital mobility. The comprehensiveness of the resulting matrices facilitates a more nuanced definition of emigration rates based on the concept of the natural labour force, which additionally considers both entries and exits of workers.
    Keywords: International migration, labor mobility, brain drain
    JEL: F22 J61 O15
    Date: 2012–09–30
  12. By: Datta Gupta, Nabanita (Aarhus University); Lau, Daniel (Cornell University); Pozzoli, Dario (Aarhus University)
    Abstract: This paper investigates whether education and working in a physically demanding job causally impact temporary work incapacity, i.e. sickness absence, and permanent work incapacity, i.e. the inflow to disability via sickness absence. Our contribution is to allow endogeneity of both education and occupation by estimating a quasi-maximum-likelihood discrete factor model. Data on sickness absence and disability spells for the population of older workers come from the Danish administrative registers for 1998-2002. We generally find an independent role of both education and occupation on temporary work incapacity only. Having at least primary education reduces women's (men's) probability of temporary work incapacity by 16% (38%) while working in a physically demanding job increases it by 37% (26%). On the other hand, conditional on sickness absence, the effects of education and occupation on permanent work incapacity are generally insignificant.
    Keywords: work incapacity, education, occupation, factor analysis, discrete factor model
    JEL: I12 I20 J18 C33 C35
    Date: 2012–10
  13. By: Paola Cardamone; Valeria Pupo; Fernanda Ricotta (Dipartimento di Economia e Statistica, Università della Calabria)
    Abstract: This paper analyses the influence of universities on Italian firm TFP at the provincial level separating the effects of main university functions, such as the creation of knowledge through research, the creation of human capital through teaching and the technology transfer. Overall, results show that the presence of the universities does not seem to affect firm productivity. If, instead, we focus only on the most developed and productive area of the country, the North of Italy, the results change: we find that university activities significantly improve firm performance.
    Keywords: University, R&D activities, Total Factor Productivity
    JEL: O30 D24 C21
    Date: 2012–10
  14. By: Nabanita Datta Gupta (Department of Economics and Business, Aarhus University, Denmark); Daniel Lau (Cornell University, USA); Dario Pozzoli (Department of Economics and Business, Aarhus University, Denmark)
    Abstract: This paper investigates whether education and working in a physically demand- ing job causally impact temporary work incapacity, i.e. sickness absence, and permanent work incapacity, i.e. the inflow to disability via sickness absence. Our contribution is to allow endogeneity of both education and occupation by estimating a quasi-maximum-likelihood discrete factor model. Data on sickness absence and disability spells for the population of older workers come from the Danish administrative registers for 1998-2002. We generally find an independent role of both education and occupation on temporary work incapacity only. Hav- ing at least primary education reduces women's (men's) probability of temporary work incapacity by 16% (38%) while working in a physically demanding job in- creases it by 37% (26%). On the other hand, conditional on sickness absence, the effects of education and occupation on permanent work incapacity are generally insignificant.
    Keywords: Work incapacity, education, occupation, factor analysis, discrete factor model
    JEL: I12 I20 J18 C33 C35
    Date: 2012–11–02
  15. By: Montizaan, Raymond (ROA, Maastricht University); Cörvers, Frank (ROA, Maastricht University); de Grip, Andries (ROA, Maastricht University); Dohmen, Thomas (ROA, Maastricht University)
    Abstract: We document the importance of negatively reciprocal inclinations in labor relationships by showing that a retrenchment of pension rights, which is perceived as unfair, causes a larger reduction in job motivation the stronger workers' negatively reciprocal inclinations are. We exploit unique matched survey and administrative data on male employees in the public sector in the Netherlands and compare the job motivation of employees born in 1950, who faced a substantial retrenchment of their pension rights resulting from a pension reform in 2006, to that of slightly older employees who remain entitled to more generous pension benefits. Job motivation is significantly lower among negatively reciprocal employees who were affected by the reform. The negative effect on job motivation is greater for negative reciprocal employees born very shortly after the cut-off date of January 1, 1950, as well as for those with many untreated colleagues, and who therefore arguably perceive the policy change as being more unfair. We also find that the treatment effect is stronger among workers who are more likely to hold their employer accountable for the drop in their pension rights, that is, those who work for the national government.
    Keywords: reciprocity, job motivation, retrenchment of pension rights
    JEL: D63 J2
    Date: 2012–10
  16. By: Lance Lochner (University of Western Ontario); Elizabeth Caucutt (University of Western Ontario)
    Abstract: This paper investigates the importance of family borrowing constraints in determining human capital investments in children at early and late ages. We begin by providing new empirical evidence that suggests binding borrowing constraints among at least some families with young children. Next, we develop an intergenerational model of lifecycle human capital accumulation to study the role of early versus late investments in children. We analytically show that when early and late investments are sufficiently complementary in the production of human capital, binding borrowing constraints during either period reduce both early and late investments. We use data from the Children of the NLSY, NLSY, and CPS to calibrate our dynastic model. Our calibrated steady state suggests that about 40% of young parents and 30% of old parents are borrowing constrained, while older children are unconstrained. We also find strong complementarity between early and late investments, suggesting that policies targeted to one stage of development tend to have similar effects on investment in the other stage. We use this calibrated model to study the effects of education subsidies, loans and transfers offered at different ages on early and late human capital investments and subsequent earnings in the short-run and long-run.
    Date: 2012
  17. By: Possumah, Bayu Taufiq; Ismail, Abdul Ghafar; Shahida , Shahimi
    Abstract: Religion and work are seldom discussed. The two have caused scholars to question the religion’s role with work. This paper reviews research on the integrate between religion and work by examining issues of concept, definition, measurement, and reviewing research that examines the relationship of work and religion with respect to: different times, types of people, organize human interactions and sources of knowledge. We then discuss the methodological requirement for reintegrating work studies into social institutional theory and indicate what the conceptual payoffs of such integration might be. These payoffs include breaking new conceptual ground, resolving theoretical puzzles and envisioning the nature of new social institutions.
    Keywords: Work Islam Ethic
    JEL: J81 J40 J24 A10 J53 J30
    Date: 2012–01–12
  18. By: Weiss, Kurt
    Abstract: The document is structured in a way that 3 Sections discuss on a rather general level the interplay of IT with people, change, and the state. After an interlude about IT as a global commodity a more specified Section addresses the interaction of IT with business (the engine powering human affairs). Future work will cover the interaction of IT with society, and learning (the driver of everything). A summary and an outlook conclude the essay not without soliciting further work.Concluding this introduction a disclaimer is in order. This is a positive, overoptimistic view.(Quoting David Ben Gurion: One must try the impossible to reach the possible.)
    Keywords: information technology; human affairs; business administration
    JEL: A1
    Date: 2012–09
  19. By: Belzil, Christian (Ecole Polytechnique, Paris); Bognanno, Michael L. (Temple University); Poinas, François (Toulouse School of Economics)
    Abstract: This article estimates a dynamic reduced-form model of intra-firm promotions using an employer-employee panel of over 300 of the largest corporations in the U.S. in the period from 1981 to 1988. The estimation conditions on unobserved individual heterogeneity and allows for both an endogenous initial condition and sample attrition linked to individual heterogeneity in demonstrating the relative importance of variables that influence promotion. The role of the executive's functional area in promotion is considered along with the existence and source of promotion fast tracks. We find that while the principal determinant of promotions is unobserved individual heterogeneity, functional area has a high explanatory power, resulting in promotion probabilities that differ by functional area for executives at the same reporting level and firm. No evidence is found that an executive's recent speed of advancement in pay grade has a causal impact on in- sample promotions after conditioning on the executive's career speed of advancement. For high-level executives, fast tracks appear to result from heterogeneity in persistent individual characteristics, not from an inherent benefit in recent advancement itself.
    Keywords: functional area, fast track, promotion, dynamic discrete choice
    JEL: C33 M5 M51
    Date: 2012–10
  20. By: Herweg, Fabian; Schmidt, Klaus M.
    Abstract: We propose a theory of ex post inefficient renegotiation that is based on loss aversion. When two parties write a long-term contract that has to be renegotiated after the realization of the state of the world, they take the initial contract as a reference point to which they compare gains and losses of the renegotiated transaction. We show that loss aversion makes the renegotiated outcome sticky and materially inefficient. The theory has important implications for the optimal design of long-term contracts. First, it explains why parties often abstain from writing a beneficial long-term contract or why some contracts specify transactions that are never ex post efficient. Second, it shows under what conditions parties should rely on the allocation of ownership rights to protect relationshipspecific investments rather than writing a specific performance contract. Third, it shows that employment contracts can be strictly optimal even if parties are free to renegotiate.
    Keywords: Renegotiation; Incomplete Contracts; Reference Points; Employment Contracts; Behavioral Contract Theory
    JEL: C78 D03 D86
    Date: 2012–10

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