nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2013‒01‒07
twenty-six papers chosen by
Tommaso Reggiani
University of Cologne

  1. Base Salaries, Bonus Payments, and Work Absence among Managers in a German Company By Christian Pfeifer
  2. Incentives Beyond the Money: Identity and Motivational Capital in Public Organizations By Mikel Berdud; Juan M. Cabasés; Jorge Nieto
  3. Trade Union Membership and Sickness Absence: Evidence from a Sick Pay Reform By Laszlo Goerke; Markus Pannenberg
  4. Working or shirking? By Nicholas Bloom; James Liang; John Roberts; Zhichun Jenny Ying
  5. Management-Employee Relations, Firm Size and Job Satisfaction By Aysit Tansel; Saziye Gazioglu
  6. Two's Company: Human Capital Composition and Performance of Entrepreneurial Pairs By Alex Coad; Bram Timmermans
  7. Farmer Families at the Heart of the Educational Revolution: Which Occupational Group Inherited Human Capital in the Early Modern Era? By Franziska Tollnek; Joerg Baten
  8. Wage Floors, Imperfect Performance Measures, and Optimal Job Design By Jenny Kragl; Anja Schöttner
  9. Human capital and regional growth perspective By Anna Golejewska
  10. Implementing Grassroots Innovation in a Large Firm: A Conceptual Framework and In-Depth Case Study By Betz, U.A.K.; Camacho, N.M.A.; Gerards, M.; Stremersch, S.
  11. Learning-by-employing: the value of commitment under uncertainty By Braz Camargo; Elena Pastorino
  12. United but (un)equal: human capital, probability of divorce and the marriage contract By Cremer, Helmuth; Pestieau, Pierre; Roeder, Kerstin
  13. Optimal CEO incentives and industry dynamics By Antonio Falato; Dalida Kadyrzhanova
  14. The Effect of Endogenous Human Capital Accumulation on Optimal Taxation By William Peterman
  15. Intrinsic Motivations of Public Sector Employees: Evidence for Germany By Robert Dur; Robin Zoutenbier
  16. Centralized Bargaining, Multi-Tasking, and Work Incentives By Lindbeck, Assar; Snower, Dennis J.
  17. Effect of Work-Life Balance Practices on Firm Productivity: Evidence from Japanese firm-level panel data By YAMAMOTO Isamu; MATSUURA Toshiyuki
  18. Optimal Long-term Contracting with Learning By Jianfeng Yu; Bin Wei; Zhiguo He
  19. Optimal Factor Tax Incidence in Two-sector Human Capital-based Models By Been-Lon Chen; Chia-Hui Lu
  20. The effect of labor market regulations on training behavior and quality: the German labor market reform as a natural experiment By Anika Jansen; Mirjam Strupler Leiser; Felix Wenzelmann; Stefan C. Wolter
  21. CEO successions and firm performance in the US financial industry By Antonio Falato; Dalida Kadyrzhanova
  23. Sexism at work By Björn Erikssoon; Tobias Karlsson; Tim Leunig; Maria Stanfors
  24. Trust, Firm Organization and the Structure of Production By Federico Cingano; Paolo Pinotti
  25. Bubbles and Incentives : An Experiment on Asset Markets By Stéphane Robin; Katerina Straznicka; Marie-Claire Villeval
  26. Competition for Traders and Risk By Bijlsma, M.; Boone, J.; Zwart, G.

  1. By: Christian Pfeifer (Leuphana University Lueneburg, Germany)
    Abstract: Questions about compensation structures and incentive effects of pay-for-performance components are important for firms' Human Resource Management as well as for economics in general and labor economics in particular. This paper provides scarce insider econometric evidence on the structure and the incentive effects of fixed base salaries, paid bonuses, and agreed bonuses under a Management-by-Objectives (MBO) incentive scheme. Six years of personnel data of 177 managers in a German company are analyzed. The main findings are: (1) base salaries increase significantly with age, whereas bonuses decrease with age; (2) larger agreed bonuses are correlated with fewer absent working days.
    Keywords: Absenteeism, Bonus, Effort, Incentives, Insider econometrics, Wages
    JEL: J22 J24 J31 J33 M12 M52
    Date: 2012–12
  2. By: Mikel Berdud (Departamento de Economía-UPNA); Juan M. Cabasés (Departamento de Economía-UPNA); Jorge Nieto (Departamento de Economía-UPNA)
    Abstract: This paper explores optimality of contracts and incentives when the principal (public organisation) can undertake investments to change agents’ (public workers) identity. In the model, workers within the organisation can have different identities. We develop a principal-agent dynamical model with moral hazard, which captures the possibility of affecting this workers’ identity through contracts offered by the firm. In the model, identity is a motivation source which reduces agents’ isutility from effort. We use the term identity to refer to a situation in which the worker shares the organisational objectives and views herself as a part of the organisation. Contrary, we use the term conflict to refer to a ituation in which workers behave self-interested and frequently in the opposite way of the organisation. We assume that identity can be achieved when principal include mission-sense developing investments in contracts. By mission we mean a single culture that is shared by all the members of an organization. We discuss the conditions under which spending resources in changing workers’ identity and invest in this kind of motivational capital is optimal for organisations. Our results may help to inform public firms’ managers about the optimal design of incentive schemes and policies. For instance, we conclude that investing in motivational capital is the best option in the long run whereas pure monetary incentives works better in the short run.
    Keywords: contracts, moral hazard, identity, socialization, mission, motivational capital.
    JEL: D03 D86
    Date: 2012
  3. By: Laszlo Goerke (Institute for Labour Law and Industrial Relations in the EU, University of Trier); Markus Pannenberg
    Abstract: In 1996, statutory sick pay was reduced for private sector workers in Germany. Using the empirical observation that trade union members are dismissed less often than non-members, we construct a model to predict how absence behaviour will respond to the sick pay reform. We show that union members may have stronger incentives to be absent and to react to the cut in sick pay. In the empirical investigation, we find a positive relationship between trade union membership and absence due to sickness and observe more pronounced reactions to the cut in sick pay among union members than among non-members. These findings suggest that more flexibility in the use of paid absence due to sickness constitutes a private gain from trade union membership.
    Keywords: difference-in-differences, sickness-related absence, Socio-Economic Panel (SOEP), statutory sick pay, trade union membership
    JEL: I18 J51 J22
    Date: 2012–10
  4. By: Nicholas Bloom; James Liang; John Roberts; Zhichun Jenny Ying
    Abstract: Over 10% of US employees now regularly work from home (WFH), but there is widespread skepticism over its impact highlighted by phrases like "shirking from home". We report the results of a WFH experiment at Ctrip, a 13,000 employee NASDAQ listed Chinese multinational. Call center employees who volunteered to WFH were randomly assigned to work from home or in the office for 9 months. Work from home led to a 13% performance increase, of which about 9.5% is from working more minutes per shift (fewer breaks and sick-days) and 3.5% from more calls per minute (attributed to a quieter working environment). Home workers also reported improved work satisfaction and their job attrition rate fell by 50%. After the experiment, the firm rolled the program out to all employees, letting them choose home or office working. Interestingly, only half of the volunteer group decided to work at home, with the other half changing their minds in favor of office working. After employees were allowed to choose where to work, the performance impact of WFH more than doubled, highlighting the benefits of choice alongside modern management practices like home working.
    Keywords: working from home, organization, productivity, field experiment, and China
    Date: 2012–12
  5. By: Aysit Tansel (Department of Economics, METU); Saziye Gazioglu (Department of Economics and Institute of Applied Mathematics, METU)
    Abstract: This paper investigates the job satisfaction in relation to managerial attitudes towards employees and firm size using the linked employer-employee survey results in Britain.We first investigate the management-employee relationships and the firm size using maximum likelihood probit estimation . Next various measues of job satisfaction are related to the management-employee relations via maximum likelihood ordered probit estimates. Four measures of job satisfaction that have not been used often are considered. They are satisfaction with influence over job; satisfaction with amount of pay; satisfaction with sense of achievement and satisfaction with respect from supervisors. Main findings indicate that management-employee relationships are less satisfactory in the large firms than in the small firms. Job satisfaction levels are lower in large firms. Less satisfactory management-employee relationships in the large firms may be a major source of the observed lower level of job satisfaction in them. These results have important policy implications from the point of view of the firm management while achieving the aims of their organizations in particular in the large firms in the area of management-employee relationships. Improving the management-employee relations in large firms will increase employee satisfaction in many respects as well as increase productivity and reduce turnover. The nature of the management-employee relations with firm size and job satisfaction has not been investigated before.
    Keywords: Job Satisfaction, Managerial Attitudes,Firm size, Linked Employer-Employee data, Britain
    JEL: J28 J5 J21 D23
    Date: 2012–12
  6. By: Alex Coad; Bram Timmermans
    Abstract: We study the effects of diverse team composition on the survival and growth of new ventures using the Danish Linked Employer-Employee database. To get cleaner measures of diverse team composition, we focus on entrepreneurial dyads, and also investigate the asymmetric effects of team composition by distinguishing between the `primary' and the `secondary' founder. We complement existing work by showing that heterogeneity in team composition is affected by the asymmetric hierarchical structure within the team, and that a unidimensional diversity indicator (which is usually applied) fails to capture a number of performance effects of heterogeneous team composition. Ventures with a STEM-educated primary founder and a Business-educated secondary founder have high employment growth, while the opposite combination (Business first, STEM second) has low employment growth. Pairs of younger individuals have lower survival chances but higher employment growth. Family firms have lower employment growth, especially when formed with your mother.
    Keywords: Diversity; Entrepreneurial Teams; Survival; Growth; Team Composition
    JEL: L25 L26 J21
    Date: 2012
  7. By: Franziska Tollnek (University of Tuebingen); Joerg Baten (University of Tuebingen and CESifo)
    Abstract: In this paper, we assess the inheritance of human capital in the early modern period with a comprehensive dataset covering eight countries in Europe and Latin America. We focus on the within-household process of human capital formation. Gregory Clark suggested that the wealthy and ‘capitalist’ groups of society provided their offspring with favorable skills. We confirm this finding partially, but there is another large group that reproduces successfully: farmers. By applying age-heaping-based techniques to a dataset of more than 322,000 observations, we argue that farmers contributed significantly to the formation of human capital and, consequently, to modern economic growth.
    JEL: J13 J24 N30 O14 Q12
    Date: 2012–12
  8. By: Jenny Kragl (Department of Governance &Economics, EBS University für Wirtschaft und Recht Wiesbaden, Germany); Anja Schöttner (Department of Economics, University of Konstanz, Germany)
    Abstract: We analyze the effects of wage floors on optimal job design in a moral-hazard model with asymmetric tasks and imperfect aggregate performance measurement. Due to cost advantages of specialization, assigning the tasks to different agents is efficient. A sufficiently high wage floor, however, induces the principal to dismiss one agent or to even exclude tasks from the production process. Imperfect performance measurement always lowers profit under multitasking, but may increase profit under specialization. We further show that variations in the wage floor and the agents' reservation utility have significantly different effects on welfare and optimal job design.
    Keywords: Job Design, Limited Liability, Minimum Wage, Moral Hazard, Multitasking, Performance Measurement
    JEL: M51 M52 M54 D82 D86
    Date: 2012–12–14
  9. By: Anna Golejewska (Faculty of Economics, University of Gdansk)
    Abstract: Accumulation of human capital is one of the major determinants of economic growth. In the last decades, theoretical and empirical literature has analysed this issue at regional level, providing interesting results. The analysis focuses on 35 regions of the Visegrad Group (NUTS-2 level) in 2002-2009 and is based on Eurostat Regional Statistics. The objective of it was to compare competitiveness and human capital intensity in the Visegrad Group regions, verify the existence of correlation and thus potential human capital growth effects. The analysis comprised two groups of indicators: measures of competitive position and human capital education indicators, as measures of competitive ability. The results showed that there have been and continue to be substantial differences among the regions as regards competitiveness and human capital. This paper has contributed to confirming the positive link between education and regional competitiveness in the selected group of countries, however further research is still needed.
    Keywords: regional competitiveness, human capital, Central and Eastern European Countries
    JEL: R11 J24 P25
    Date: 2012–12
  10. By: Betz, U.A.K.; Camacho, N.M.A.; Gerards, M.; Stremersch, S.
    Abstract: In order to promote the generation of market breakthroughs and disruptive innovation, organizations increasingly promote grassroots innovation, i.e. the emergence of innovative ideas from their whole employee base. Despite this surge in interest in grassroots innovation, there is a lack of guidance on how organizations should design and implement grassroots innovation programs. A key challenge faced by organizations promoting grassroots innovation is how to motivate the right employees to submit their best ideas and persist in their quest to transform such ideas in successful new businesses. In this paper, we draw on self-determination theory (SDT) to propose a conceptual framework that organizations can use to design effective grassroots innovation programs. We offer an in-depth understanding of how top-management support and the mechanisms behind grassroots innovation programs (e.g., idea sourcing, team formation, team/idea selection and training/coaching) influence employees’ motivation to submit their best ideas and, consequently, the success of grassroots innovation programs. We argue, in line with SDT, that successful grassroots innovation programs need to promote employees’ intrinsic motivation for innovation by satisfying three innate human needs: competence, autonomy and relatedness. Through an in-depth case study (the Innospire program at Merck), we provide evidence that support our propositions and discuss how organizations can successfully implement the proposed framework.
    Keywords: corporate entrepreneurship;self-determination theory;grassroots innovation;in-depth case study
    Date: 2012–12–21
  11. By: Braz Camargo; Elena Pastorino
    Abstract: We analyze commitment to employment in an environment in which an infinitely lived firm faces a sequence of finitely lived workers who differ in their ability to produce output. The ability of a worker is initially unknown to both the worker and the firm, and a worker's effort affects the information on ability that is conveyed by performance. We characterize equilibria and show that they display commitment to employment only when effort has a persistent but delayed impact on output. In this case, by providing insurance against early termination, commitment encourages workers to exert effort, thus improving the firm's ability to identify their talent. We argue that the incentive value of commitment to retention helps explain the use of fixed probationary appointments in environments in which there exists uncertainty about ability.
    Keywords: Employment
    Date: 2012
  12. By: Cremer, Helmuth (TSE, (IDEI and Institut universitaire de France)); Pestieau, Pierre (TSE, (CREPP, University of Liège, CORE, UCL)); Roeder, Kerstin (LMU)
    Abstract: This paper studies how the risk of divorce a¤ects the human capital decisions of a young couple. We consider a setting where complete specialization (one of the spouses uses up all the education resources) is optimal with no divorce risk. Symmetry in education (both spouses receive an equal amount of education) then acts like an insurance device in case of divorce particularly when the institutions do not compensate for di¤erences in earnings. But, at the same time symmetry in education is less e¢ cient than the extreme specialization. This is the basic tradeo¤ underlying our analysis. We show that the symmetric allocation will become more attractive as the probability of divorce increases, if risk aversion is high and/or labor supply elasticity is low. However, it is only a ?second-best? solution as the insurance protection is achieved at the expense of an e¢ ciency loss. E¢ ciency can be restored through suitably designed marriage contracts because they can provide the appropriate insurance against divorce to a couple who opts for specialization. Finally, we study how the (economic) use of marriage is a¤ected by the possibility of divorce.
    Keywords: post-marital education, marriage contract, divorce
    Date: 2012–11
  13. By: Antonio Falato; Dalida Kadyrzhanova
    Abstract: This paper develops a competitive equilibrium model of CEO compensation and industry dynamics. CEOs make product pricing and product improvement decisions subject to shareholders' compensation choices and idiosyncratic shocks to product quality. The choice of high-powered incentives optimally trades off the benefits from expected product improvements and the associated agency costs. In market equilibrium, the interaction between CEO pay and product market decisions affects the stationary distribution of firms. We characterize a dynamic feedback effect of industry structure on CEO incentives. As a result of this effect, we predict that the performance-based component of CEO pay should be higher, (i) across industries, when the degree of heterogeneity of industry structure is lower; (ii) within industries, when firms are laggards with respect to their industry peers. We empirically estimate pay-performance sensitivity for a large sample of U.S. CEOs and other top executives over the 1993 to 2004 period and find strong support for our theory. Our results offer a novel product market rationale for the increased reliance of CEO pay on bonuses and stock options over the 1990s.
    Date: 2012
  14. By: William Peterman (Federal Reserve Board of Governors)
    Abstract: This paper considers the impact of endogenous human capital accumulation on optimal tax policy in a life cycle model. Including endogenous human capital accumulation, either through learning-by-doing or learning-or-doing, is analytically shown to create a motive for the government to use age-dependent labor income taxes. If the government cannot condition taxes on age, then it is optimal to use a tax on capital in order to mimic such taxes. Quantitatively, introducing learning-by-doing or learning-or-doing increases the optimal tax on capital by forty or four percent, respectively. Overall, the optimal tax on capital is thirty five percent higher in the model with learning-by-doing compared to the model with learning-or-doing implying that how human capital accumulates is of significant importance when determining the optimal tax policy.
    Date: 2012
  15. By: Robert Dur (Erasmus University Rotterdam); Robin Zoutenbier (Erasmus University Rotterdam)
    Abstract: We examine differences in altruism and laziness between public sector employees and private sector employees. Our theoretical model predicts that the likelihood of public sector employment increases with a worker's altruism, and increases or decreases with a worker's laziness depending on his altruism. Using data from the German Socio-Economic Panel Study, we find that public sector employees are significantly more altruistic and lazy than observationally equivalent private sector employees. A series of robustness checks show that these patterns are stronger among higher educated workers; that the sorting of altruistic people to the public sector takes place only within the caring industries; and that the difference in altruism is already present at the start of people's career, while the difference in laziness is only present for employees with sufficiently long work experience.
    Keywords: public service motivation; altruism; laziness; sorting; public sector employment; personality characteristics
    JEL: H1 J45 M5
    Date: 2012–12–07
  16. By: Lindbeck, Assar (Research Institute of Industrial Economics (IFN)); Snower, Dennis J. (Birkbeck College, University of London)
    Abstract: The paper examines the implications of an important aspect of the ongoing reorganization of work - the move from occupational specialization toward multi-tasking - for centralized wage bargaining. The analysis shows how, on account of this reorganization, centralized bargaining becomes increasingly inefficient and detrimental to firms' profit opportunities, since it prevents firms from offering their employees adequate incentives to perform the appropriate mix of tasks. The paper also shows how centralized bargaining inhibits firms from using wages to induce workers to learn how to use their experience from one set of tasks to enhance their performance at other tasks. In this way, the paper helps explain the increasing resistance to centralized bargaining in various advanced market economies.
    Keywords: Centralized wage bargaining; restructuring; organization of firms; technological change; information flows; employment; wage formation; unemployment
    JEL: A00
    Date: 2012–12–28
  17. By: YAMAMOTO Isamu; MATSUURA Toshiyuki
    Abstract: This paper examines how firm practices that could contribute to worker attainment of work-life balance (WLB) affect the total factor productivity (TFP) of a firm, by using panel data of Japanese firms from the 1990s. We observed a positive correlation between the WLB practices and TFP among sampled firms. However, that correlation vanished when we controlled for unobserved firm heterogeneity, and we found no general causal relationship in which WLB practices increase firm TFP in the medium or long run. For firms with the following characteristicsmdash;large, manufacturing, and have exhibited labor hoarding during recessionsmdash;we found positive and sizable effects. Since these firms are likely to incur large fixed employment costs, we infer that firms investing in firm-specific human skills or having large hiring/firing costs can benefit from WLB practices through a decrease in turnover or an increase in recruiting effectiveness.
    Date: 2012–12
  18. By: Jianfeng Yu (University of Minnesota); Bin Wei (Federal Reserve Board); Zhiguo He (University of Chicago, Booth School of Business)
    Abstract: This paper introduces profitability uncertainty into an infinite-horizon variation of the classic Holmstrom and Milgrom (1987) model, and studies optimal dynamic contracting with endogenous learning. The agent's potential belief manipulation leads to the hidden information problem, which makes incentive provisions intertemporally linked in the optimal contract. We reduce the contracting problem into a dynamic programming problem with one state variable, and characterize the optimal contract with an ordinary differential equation. In the benchmark case of Holmstrom and Milgrom (1987) without learning, the optimal effort is constant, and the optimal contract is linear. In contrast, in our model with endogenous learning, the optimal effort policy becomes history dependent, and decreases over time on average. Moreover, we show that the optimal contract exhibits an option-like feature in that the incentives rise after good performance shocks.
    Date: 2012
  19. By: Been-Lon Chen (Institute of Economics, Academia Sinica, Taipei, Taiwan); Chia-Hui Lu (Department of Economics, National Taipei University)
    Abstract: This paper studies the optimal factor tax incidence in a standard two-sector, human capital-based endogenous growth model elucidated by Lucas (1988). Capital income taxes generate dynamic inefficiency for capital accumulation and labor income taxes create dynamic inefficiency for human capital accumulation. A factor tax incidence is a tradeoff between these two inefficiencies. A switch from capital income taxes to labor income taxes reduces the long-run welfare coming from lower leisure and increases the long-run welfare originated from higher economic growth and higher consumption. Because the representative agent’s learning time and human capital are inseparable and thus affect learning activities at the same degree, we find that based on the current US income tax code, it is optimal to first tax capital income, and to resort to taxing labor income only when tax revenue is insufficient to cover government expenditure.
    Keywords: two-sector model, human capital, optimal factor tax incidence
    JEL: E62 H22 O41
    Date: 2012–12
  20. By: Anika Jansen (German Federal Institute for Vocational Education and Training (BiBB), Bonn); Mirjam Strupler Leiser (University of Bern, Centre for Research in Economics of Education); Felix Wenzelmann (German Federal Institute for Vocational Education and Training (BiBB), Bonn); Stefan C. Wolter (University of Bern, CESifo & IZA)
    Abstract: Labor market frictions are seen in many extensions of the classical human capital theory as a prerequisite for firms financing general training. The labor market reforms in Germany at the beginning of the millennium have therefore been seen by many as a danger to the firms’ willingness to support the apprenticeship training system. This paper analyzes the training strategies German firms deployed to cope with the greater labor market flexibility as a result of the labor market reform. Switzerland where no reforms had taken place serves as the counterfactual. The results show that firms successfully reduced the net-costs of training by involving apprentices in more work and reducing non-productive tasks, like practicing. Contrary to the widespread fear, this adapted training strategy resulted also in a substantial increase in work-related competencies and productivity of apprentices.
    Keywords: Apprenticeship training, difference-in-differences matching estimator, cost-benefit, labor market reforms
    JEL: C0 I20 J50
    Date: 2012–12
  21. By: Antonio Falato; Dalida Kadyrzhanova
    Abstract: This paper examines the labor market for CEOs in the financial sector from 1988 to 2007, using a new hand-collected sample of 1,655 CEO successions. We document that there is a significant role of outside successions, as about one out of two successions involves an outside hire. In addition, using difference-in-differences estimates, we study the link between the labor market for finance CEOs and firm performance. We document that (1) there is a large performance gap between inside and outside successions, as outside successions are followed by significantly larger improvements in firm performance; (2) the performance gap between outside and inside successions is larger for firms with an insider dominated board of directors; (3) the performance gap widened after an important deregulation event (the 1999 Gramm-Leach-Bliley Act). These results are robust to using a battery of firm performance measures (short-run and long-run stock market returns, and several long-run operating performance measures) and a matched sample approach to address selection issues. Overall, our findings suggest that managerial human capital is very valuable in the financial industry, and weak internal governance hurts firm performance by limiting the scope of labor market competition.
    Date: 2012
  22. By: Vincenzo Scoppa; Daniela Vuri (Dipartimento di Economia e Statistica, Università della Calabria)
    Abstract: Efficiency wages theories argue that the threat of firing, coupled with a high unemployment rate, is a mechanism that discourages employee shirking in asymmetric information contexts. Our empirical analysis aims to verify the role of unemployment as a worker discipline device, considering the different degree of job security offred by the Italian Employment Protection Legislation to workers employed in small and large firms. We use a panel of administrative data (WHIP) and consider sickness absences as an empirical proxy for employee shirking. Controlling for a number of individual and firm characteristics, we investigate the relationship between worker's absences and local unemployment rate (at the provincial level). We find a strong negative impact of unemployment on absenteeism rate, which is considerable larger in small firms due to a significantly lower protection from dismissals in these firms. We also find that workers who are absent more frequently face higher risks of dismissal. As an indirect test of the role of unemployment as worker's discipline device we show that public sector employees, almost impossible to fire, do not react to the local unemployment.
    Keywords: Shirking, Absenteeism, Employment Protection Legislation, Unemployment
    JEL: J41 M51 J45
    Date: 2012–12
  23. By: Björn Erikssoon; Tobias Karlsson; Tim Leunig; Maria Stanfors
    Abstract: Women have, on average, been less well-paid than men throughout history. Prior to 1900, most economic historians see the gender wage gap as a reflection of men's greater strength and correspondingly higher productivity. This paper investigates the gender wage gap in cigar making around 1900. Strength was rarely an issue, but the gender wage gap was large. Two findings suggest that employers were not sexist. First, differences in earnings by gender for workers paid piece rates can be fully explained by differences in experience and other productivity-related characteristics. Second, conditioning on those characteristics, women were just as likely to be promoted to the better paying piece rate section. Neither finding is compatible with a simple model of sex-based discrimination. Instead, the gender wage gap can be decomposed into two components. First, women were typically less experienced, in an industry in which experience mattered. Second there were some jobs that required strength, for which men were better suited. Because strength was so valuable in the other jobs at this time, men commanded a wage premium in the general labour market, raising their reservation wage. Hiring a man required the firm to pay a 'man's wage'. This implies that firms that were slow to feminise their time rate workforce ended up with a higher cost structure than those that made the transition more quickly. We show that firms with a higher proportion of women in their workforce in 1863 were indeed more likely to survive 35 years later.
    Keywords: gender, productivity, discrimination, piece-rates, time-rates, labour markets, firm survival
    JEL: J16 J24 J71 J33 J40 L25
    Date: 2012–12
  24. By: Federico Cingano; Paolo Pinotti
    Abstract: Interpersonal trust favors the expansion of organizations by allowing the delegation of decisions and tasks among anonymous others or people that interact only infrequently. We document these facts for a representative survey of Italian manufacturing firms and use this source of data to construct an industry-specific measure of need-for-delegation in production. We then show that trust shapes comparative advantage, as high-trust regions and countries exhibit larger value added and export shares in delegation-intensive industries relative to other industries. Such effects are associated with an increase in average firm size, while the number of firms is not significantly affected. Larger average size reflects in turn a shift of the distribution away from the smallest firms, consistently with the idea that trust allows organizations to expand beyond the narrow circle of family members and close friends.
    Keywords: Trust, delegation, firm size, comparative advantage
    Date: 2012–09
  25. By: Stéphane Robin (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); Katerina Straznicka (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); 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: We explore the effects of competitive incentives and of their time horizon on the evolution of both asset prices and trading activity in experimental asset markets. We compare i) a no-bonus treatment based on Smith, Suchanek and Williams (1988) ; ii) a short-term bonus treatment in which bonuses are assigned to the best performers at the end of each trading period ; iii) a long-term bonus treatment in which bonuses are assigned to the best performers at the end of the 15 periods of the market. We find that the existence of bonus contracts does not increase the likelihood of bubbles but it affects their severity, depending on the time horizon of bonuses. Markets with long-term bonus contracts experience lower price deviations and a lower turnover of assets than markets with either no bonuses or long-term bonus contracts. Short-term bonus contracts increase price deviations but only when markets include a higher share of male traders. At the individual level, the introduction of bonus contracts increases the trading activity of males, probably due to their higher competitiveness. Finally, both mispricing and asset turnover are lower when the pool of traders is more risk-averse.
    Keywords: Asset market; bubbles; incentives; bonuses; risk attitudes; experiment
    Date: 2012–12–21
  26. By: Bijlsma, M.; Boone, J.; Zwart, G. (Tilburg University, Tilburg Law and Economics Center)
    Abstract: Abstract: The financial crisis has been attributed partly to perverse incentives for traders at banks and has led policy makers to propose regulation of banks’ remuneration packages. We explain why poor incentives for traders cannot be fully resolved by only regulating the bank’s top executives, and why direct intervention in trader compensation is called for. We present a model with both trader moral hazard and adverse selection on trader abilities. We demonstrate that as competition on the labour market for traders intensifies, banks optimally offer top traders contracts inducing them to take more risk, even if banks fully internalize the costs of negative outcomes. In this way, banks can reduce the surplus they have to offer to lower ability traders. In addition, we find that increasing banks’ capital requirements does not unambiguously lead to reduced risk-taking by their top traders.
    Keywords: optimal contracts;remuneration policy;imperfect competition;financial institutions;risk.
    JEL: G21 G32 L22
    Date: 2012

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