nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2013‒03‒16
eighteen papers chosen by
Tommaso Reggiani
University of Cologne

  1. Authority and Incentives in Organizations By Matthias Kräkel
  2. Employee Recognition and Performance: A Field Experiment By Christiane Bradler; Robert Dur; Susanne Neckermann; Arjan Non
  3. Becoming "We" Instead of "I", Identity Management and Incentives in the Workplace By Donze, Jocelyn; Gunnes, Trude
  4. Tournaments in religious organizations with investment in religious human capital: choosing the pope By Oliveira, Livio Luiz Soares; Netto, Giácomo Balbinotto
  5. Does Better Pre-Migration Performance Accelerate Immigrants' Wage Assimilation? By Hirsch, Boris; Jahn, Elke J.; Toomet, Ott; Hochfellner, Daniela
  6. Career Progression, Economic Downturns, and Skills By Jerome Adda; Christian Dustmann; Costas Meghir; Jean-Marc Robin
  7. Default Options and Training Participation By Borghans, Lex; Golsteyn, Bart H.H.
  8. Wages of Non-regular Workers: Compensation for employment insecurity and lack of work flexibility (Japanese) By TSURU Kotaro; KUME Koichi; OHTAKE Fumio; OKUDAIRA Hiroko
  9. Globalization of Monitoring Practices: The Case of American Influences on the Dismissal Risk of European CEOs By Oxelheim, Lars; Randoy, Trond
  10. Wage Premiums for Firms' Work-Life Balance Practice: Evidence from Japanese matched firm-worker data (Japanese) By KURODA Sachiko; YAMAMOTO Isamu
  11. Are ICT, Workplace Organization and Human Capital Relevant for Innovation? A Comparative Study Based on Swiss and Greek Micro Data By Spyros Arvanitis; Euripidis N. Loukis; Vasiliki Diamantopoulou
  12. Constraints in Organizational Learning, Cognitive Load and it’s Effect on Employee Behavior By Chatterjee, Sidharta
  13. Hierarchies, the Small Firm Effect, and Entrepreneurship: Evidence from Swedish Microdata By Tåg, Joacim; Åstebro, Thomas; Tho, Peter
  14. School Starting Age and Crime By Landersø, Rasmus; Nielsen, Helena Skyt; Simonsen, Marianne
  15. Dynamics of effort allocation and evolution of trust: an agent-based model By Hassani Mahmooei, Behrooz; Parris, Brett
  16. Endogenous financial literacy, saving and stock market participation By Spataro, Luca; Corsini, Lorenzo
  17. Aging and Pension Reform: Extending the Retirement Age and Human Capital Formation By Edgar Vogel; Alexander Ludwig; Axel Börsch-Supan
  18. Emergence of a professional sports league and human capital formation for sports: The Japanese Professional Football League. By Yamamura, Eiji

  1. By: Matthias Kräkel
    Abstract: The paper analyzes how the choice of organizational structure leads to the best compromise between controlling behavior based on authority rights and minimizing costs for implementing high efforts. Concentrated delegation and hierarchical delegation turn out to be never an optimal compromise. If the CEO is more efficient than the division heads (i.e., the CEO's costs from exerting high effort are smaller than those of the division heads), the owner will prefer full delegation to the divisions to replace high incentive pay for motivating the division heads by incentives based on private benefits of control. In that situation, the importance of cooperative behavior between the firm's divisions determines whether decentralization or cross-authority delegation is the optimal form of full delegation. If, however, the division heads are more efficient than the CEO, then centralization or partial delegation can also be optimal.
    Keywords: authority, centralization, contracts, decentralization, moral hazard
    JEL: D21 D23 D86 L22
    Date: 2013–03
  2. By: Christiane Bradler (ZEW Centre for European Economic Research Mannheim); Robert Dur (Erasmus University Rotterdam); Susanne Neckermann (Erasmus University Rotterdam); Arjan Non (Maastricht University)
    Abstract: This paper reports the results from a controlled field experiment designed to investigate the causal effect of public recognition on employee performance. We hired more than 300 employees to work on a three-hour data-entry task. In a random sample of work groups, workers unexpectedly received recognition after two hours of work. We find that recognition increases subsequent performance substantially, and particularly so when recognition is exclusively provided to the best performers. Remarkably, workers who did not receive recognition are mainly responsible for this performance increase. This result is consistent with workers having a preference for conformity.
    Keywords: Employee motivation; recognition; reciprocity; conformity; field experiment
    JEL: C93 M52
    Date: 2013–03–04
  3. By: Donze, Jocelyn; Gunnes, Trude
    Abstract: This paper studies how a firm fosters formal and informal interactions among its employees to create a collective identity and positively influence effort. We develop a model where employees have both a personal and a social ideal for effort, and where the firm can make its workforce more sensitive to this social ideal by allocating part of the work time to social interactions. We show that by investing in social capital, the firm can increase the power of peer pressure, make screening among heterogeneous employees less costly and, finally, augment the effectiveness of monetary incentives.
    Keywords: monetary and non monetary incentives, social norms, norm regulation, identity
    JEL: D03 D21 D86 J33 M5
    Date: 2013–03–05
  4. By: Oliveira, Livio Luiz Soares; Netto, Giácomo Balbinotto
    Abstract: The objective of this manuscript is to explain how tournaments can be used in order to select the best candidates to fulfill the highest posts in religious organizations. With this purpose, in this working paper, we seek to show an model, modified from the original one, where the psychic income differential has been included, as a fundamental stimulus factor, for the candidates of a religious tournament, with the purpose of obtaining their maximum effort.
    Keywords: Religious organization, Tournaments, Canon Law
    JEL: J33 M5
    Date: 2013–02–21
  5. By: Hirsch, Boris (University of Erlangen-Nuremberg); Jahn, Elke J. (Institute for Employment Research (IAB), Nuremberg); Toomet, Ott (University of Tartu); Hochfellner, Daniela (Institute for Employment Research (IAB), Nuremberg)
    Abstract: This paper analyzes wage assimilation of ethnic German immigrants to Germany. We use unique administrative data that include a standardized measure of immigrants' pre-migration wage based on occupation, industry, tenure, qualification, and the German wage structure. We find that immigrants experience a substantial initial wage disadvantage compared to natives. During their first 15 years in the host country they manage to close a considerable part of this gap, though assimilation is only partial. A 10% higher pre-migration wage translates into a 1.6% higher wage in Germany when also controlling for educational attainment, thus pointing at partial transferability of human capital acquired in the source country to the host country's labor market. We also find that wage assimilation is significantly accelerated for immigrants with a higher pre-migration wage. Our results are in line with strong complementarities between general skills and host country-specific human capital, in particular proficiency in the host country's language.
    Keywords: migration, labor market assimilation, ethnic Germans, transferability of human capital
    JEL: J61 J31 J24
    Date: 2013–02
  6. By: Jerome Adda; Christian Dustmann; Costas Meghir; Jean-Marc Robin
    Abstract: This paper analyzes the career progression of skilled and unskilled workers, with a focus on how careers are affected by economic downturns and whether formal skills, acquired early on, can shield workers from the effect of recessions. Using detailed administrative data for Germany for numerous birth cohorts across different regions, we follow workers from labor market entry onwards and estimate a dynamic life-cycle model of vocational training choice, labor supply, and wage progression. Most particularly, our model allows for labor market frictions that vary by skill group and over the business cycle. We find that sources of wage growth differ: learning-by-doing is an important component for unskilled workers early on in their careers, while job mobility is important for workers who acquire skills in an apprenticeship scheme before labor market entry. Likewise, economic downturns affect skill groups through very different channels: unskilled workers lose out from a decline in productivity and human capital, whereas skilled individuals suffer mainly from a lack of mobility.
    JEL: C15 C23 C33 I24 J01 J08 J22 J24 J3 J31 J6 J62
    Date: 2013–02
  7. By: Borghans, Lex (Maastricht University); Golsteyn, Bart H.H. (Maastricht University)
    Abstract: This paper analyzes whether defaults affect the choice for courses followed at work. In addition, we analyze whether the size of the default effect varies with employees' personality and skill-deficiencies. We perform an experiment in which workers are hypothetically offered three courses which they can accept or exchange for other courses. Randomizing the default package of courses, we identify the default effect. Default courses are chosen approximately three times more often than other courses. They are chosen more often if people have skill-deficiencies in these courses, suggesting that people consider the default to be an advice. Women choose default courses more often than men. Women with less self-confidence and men with lower cognitive skills choose the default courses more often.
    Keywords: training, human capital investment, default
    JEL: J24 J31 I2
    Date: 2013–02
  8. By: TSURU Kotaro; KUME Koichi; OHTAKE Fumio; OKUDAIRA Hiroko
    Abstract: We examine survey-based evidence on the desired wage compensation of non-regular workers in response to employment insecurity and work flexibility. Comparing the compensation rate by work status, contract workers ask for the highest rate for employment insecurity while part time workers ask for the highest rate for work flexibility. We investigate the determinants of the compensation. Female, aged (over age 50), and risk averse workers are likely to ask for more compensation. Non-regular workers who have experienced regular work or are looking for regular work ask for more compensation for job insecurity, while part time workers ask for more compensation for work flexibility. Estimating wage equations of non-regular workers shows that part time workers or married female workers received negative wage premiums, which can be interpreted as evidence consistent with work-life balance from the viewpoint of compensating wage differentials. The effect of job insecurity on wages is not clear.
    Date: 2013–02
  9. By: Oxelheim, Lars (Research Institute of Industrial Economics (IFN)); Randoy, Trond (University of Agder)
    Abstract: This study examines globalization of monitoring practices by focusing on how American (U.S.) influences on European firms impact the dismissal risk for these firms' CEOs. Specifically, we argue that the stronger short term orientation of the American corporate governance system increase the dismissal performance sensitivity faced by European CEOs, indirectly and directly. The former materializes via European firms cross-listing on U.S. exchanges, the latter results from European firms hiring U.S. independent board members. Both influences are expected to result in increased dismissal performance sensitivity. Based on data from the 250 largest European publicly traded firms we find a significant increase in the dismissal sensitivity of poorly performing companies with American board members and a support for migration of American executive pay practice. However, no significant increase in dismissal performance sensitivity was identified from U.S. cross-listing. In line with our agency theory based prediction, this indicates an institutional contagion driven by the presence of U.S. board members on European corporate boards. To policy makers the message is that internationalization of boards should not be banned or restricted, since it provides owners with more options to influence the corporate governance of the firm.
    Keywords: Executive pay; CEO dismissal; Performance sensitivity; Foreign board membership
    JEL: G15 G18 G32 M14 M16 M52
    Date: 2013–03–05
  10. By: KURODA Sachiko; YAMAMOTO Isamu
    Abstract: This paper investigates the compensating wages hypothesis for work-life practices, by examining how workers' wages are lowered when work-life balance practices are introduced into the workplace. Two types of data, observed and hypothetical one, reveal the following. First, we find a negative wage premium of about 9% for male workers when estimating wage function based on the treatment-effect model. Second, the answers to hypothetical questions such as "how much of a wage cut is appropriate if work-life balance practices are introduced" indicate a huge gap between workers and firms. Namely, many workers answered that a 0% to 20% wage cut is acceptable, while most of the firms said that a 100% wage cut is necessary or the introduction of work-life balance practice is out of the question. This result may reflect the fact that firms recognize the large cost of the work-life balance practice, and thus the adoption rate of such practice is low in Japan.
    Date: 2013–02
  11. By: Spyros Arvanitis (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Euripidis N. Loukis (University of the Aegean, Department of Information and Communication Systems Engineering, Greece); Vasiliki Diamantopoulou (University of the Aegean, Department of Information and Communication Systems Engineering, Greece)
    Abstract: This paper investigates the relationship between indicators for the intensity of use of ICT (examining three different types of ICT widely used in firms: internal, e-sales, e-procurement IS), several forms of workplace organization, and human capital on one hand, and several measures of innovation performance at firm level on the other hand, in an innovation equation framework, in which was also controlled for standard innovation determinants such as demand, competition and firm size. The empirical part is based on data of Swiss and Greek firms. This paper contributes to literature in three ways: first, it analyzes three important factors, i.e. information technology, workplace organization and human capital, which are considered to be drivers of innovation performance particularly in the last fifteen to twenty years, in the same setting, it uses several innovation indicators that cover both the input and the output side of the innovation process and, third, it does the analysis in a comparative setting for two countries, Greece and Switzerland, with quite different levels of technological and economic development.
    Keywords: ICT, workplace organization, product innovation, process innovation
    JEL: O31
    Date: 2013–03
  12. By: Chatterjee, Sidharta
    Abstract: Traditionally, learning organizations face certain constraints related to both exogenous and endogenous factors. In this paper, I model three well established constraints that employees face while being part of their organizations. These are in the tune of constraints on their natural behavior which is explicit, and two implicit constraints on their endeavor to acquire new knowledge and perform new actions. The implicit constraints which are elaborated, is related to their relative performance in acquiring new knowledge and by their consecutive actions based on the new knowledge gained. This paper, so forth, attempts to underline such limitations which the agents face under organizational culture and suggest possible strategic initiatives that would effectively counteract such binding limitations to stimulate positive performances from their end.
    Keywords: Organizational learning, constraints, employee behavior, cognitive load, knowledge, organizational adaptation
    JEL: L20 M14 M51
    Date: 2013–01–11
  13. By: Tåg, Joacim (Research Institute of Industrial Economics (IFN)); Åstebro, Thomas (HEC Paris); Tho, Peter (Goizueta Business School)
    Abstract: We explore whether the tendency for smaller firms to have fewer hierarchical layers explains the well-documented inverse correlation between firm size and the rate at which employees become business owners. Our analysis is based on a Swedish matched employer-employee dataset. Conditional on firm size, employees in firms with more layers are less likely to enter entrepreneurship, to become self-employed, and to switch to another employer. The effects of layers are much stronger for business creation than for jobswitching and they are stronger for entrepreneurship than for self-employment. However, hierarchies constitute only a partial explanation of the small firm effect. Potential explanations for the effects of layers are examined. Part of the effect appears to be due to preference sorting by employees, and part due to employees in firms with fewer layers having a broader range of skills.
    Keywords: Entrepreneurship; Employee mobility; Hierarchy; Rank; Small firm effect
    JEL: D20 J20 L26 M50
    Date: 2013–02–13
  14. By: Landersø, Rasmus (Rockwool Foundation Research Unit); Nielsen, Helena Skyt (Aarhus University); Simonsen, Marianne (Aarhus University)
    Abstract: This paper investigates the effects of school starting age on crime while relying on variation in school starting age induced by administrative rules; we exploit that Danish children typically start first grade in the calendar year they turn seven, which gives rise to a discontinuity in children's school starting age. Analyses are carried out using register-based Danish data. We find that higher age at school start lowers the propensity to commit crime, but that this reduction is caused by incapacitation while human capital accumulation is unaffected. Importantly, we also find that the individuals who benefit most from being old-for-grade are those with high latent abilities whereas those with low latent ability seem to be unaffected by being old-for-grade in school.
    Keywords: old-for-grade, school start, criminal charges, violence, property crime
    JEL: I21 K42
    Date: 2013–02
  15. By: Hassani Mahmooei, Behrooz; Parris, Brett
    Abstract: Trust is a dynamic and complex phenomenon and understanding the factors which affect its formation, evolution and disappearance is a critical research issue. It has been shown that trust plays a key role in how human and social capital develop, how economies grow and how societies progress. In this paper, we present an agent-based model of the relations between a dynamic effort allocation system, an evolving trust framework and a reputation module to study how changes in micro-level rent-seeking traits and decisions can shape the emergence of trust across the simulated environment. According to our results, variations in trust are correlated more with the returns to being productive, rather than rent-seeking. In line with previous studies, our model shows that higher than average levels of risk-taking by agents lead to further trust and gains during an interaction, though taken to an extreme, both trust and gain can decline as a result of reckless decisions. We also report on the formation of trust clusters in our model as an emergent phenomenon.
    Keywords: Trust, Rent-seeking, Agent-based Model, Reputation, Effort Allocation, Social Simulation
    JEL: C61 C63 D72
    Date: 2012–07
  16. By: Spataro, Luca; Corsini, Lorenzo
    Abstract: There is a consolidated empirical literature providing evidence of the fact that financial literacy, human capital, savings and stock market participation are interconnected decisions. However, to the best of our knowledge, a theoretical explanation of such connections is missing. In this paper we aim at filling this gap, by building a framework that includes all these decisions in an encompassing model. The results of our model provide a theoretical foundation for the role and the determinants of financial literacy and are able to explain several stylized facts on literacy and stock market participation.
    Keywords: financial literacy, human capital, savings, stock market participation
    JEL: D14 D91 G11 J24
    Date: 2013–02
  17. By: Edgar Vogel; Alexander Ludwig; Axel Börsch-Supan
    Abstract: Projected demographic changes in industrialized and developing countries vary in extent and timing but will reduce the share of the population in working age everywhere. Conventional wisdom suggests that this will increase capital intensity with falling rates of return to capital and increasing wages. This decreases welfare for middle aged agents with assets accumulated for retirement. This paper addresses three important adjustments channels to dampen these detrimental effects of ageing: investing abroad, endogenous human capital formation and increasing the retirement age. Although non of these suggestions is new in itself, we examine their effects jointly in one coherent model. Our quantitative finding is that openness has a relatively mild effect. In contrast, endogenous human capital formation in combination with an increase in the retirement age has strong effects. Under these adjustments maximum welfare losses of demographic change for households alive in 2010 are reduced by about 3 percentage points.
    JEL: C68 E17 E25 J11 J24
    Date: 2013–02
  18. By: Yamamura, Eiji
    Abstract: The Japanese Professional Football League (J-league) was established in 1993. Based on individual level data, this study investigated how emergence of the league affected Japanese people playing football using the differences-in-differences method. The following main findings were obtained. (1) In areas where a J-League team’s home town was located, people were more likely to play football after emergence of the J-League than before it emerged. (2) There was a positive effect of the J-league on people who were younger and older than 25 years old between 1991 and 1996. (3) Between 1991 and 2006, this positive effect persisted and increased for younger people, while it disappeared for older people.
    Keywords: Football; Emergence of professional league; industrial development
    JEL: J24 L83 Z1
    Date: 2013–02–26

This nep-hrm issue is ©2013 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.