nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2013‒04‒06
twenty-one papers chosen by
Tommaso Reggiani
University of Cologne

  1. Strive to be first or avoid being last: An experiment on relative performance incentives. By E. Glenn Dutcher; Loukas Balafoutas; Florian Lindner; Dmitry Ryvkin; Matthias Sutter
  2. Sharing One's Fortune? An Experimental Study on Earned Income and Giving By Tonin, Mirco; Vlassopoulos, Michael
  3. Management-Employee Relations, Firm Size and Job Satisfaction By Tansel, Aysit; Gazioglu, Saziye
  4. Career progression, economic downturns and skills By Jerome Adda; Christian Dustmann; Costas Meghir; Jean-Marc Robin
  5. Task Assignment under Agent Loss Aversion By Kohei Daido; Kimiyuki Morita; Takeshi Murooka; Hiromasa Ogawa
  6. The Impact of Leadership Incentives in Intergroup Contests By Gerald Eisenkopf
  7. The Efficiency of Human Capital Allocations in Developing Countries By Dietrich Vollrath
  8. Uncertainty, risk, and incentives: theory and evidence By Zhiguo He; Si Li; Bin Wei; Jianfeng Yu
  9. Minimum Wages and Workers' "Motivation": An approach using an economic experiment (Japanese) By MORI Tomoharu
  10. Market Thickness and the Early Labor Market Career of University Graduates- An urban advantage? By Ahlin, Lina; Andersson, Martin; Thulin, Per
  11. The assignment of workers to tasks with endogenous supply of skills By DUPUY Arnaud
  12. Mobility of human capital and its effect on regional economic development. Review of theory and empirical literature By Herbst, Mikolaj; Rok, Jakub
  13. Health, Work Intensity, and Technological Innovations By Raouf Boucekkine; Natali Hritonenko; Yuri Yatsenko
  14. What explains schooling differences across countries? By Cordoba, Juan Carlos; Ripoll, Marla
  15. Only Mine or All Ours: An Artefactual Field Experiment on Procedural Altruism By Utteeyo Dasgupta; Subha Mani
  16. Team Heterogeneity in Startups and its Development over Time By Kaiser, Ulrich; Müller, Bettina
  17. Does Modernization Improve Performance: Evidence from Indian Police By Kumar, Surender; Kumar, Sudesh
  18. Incentives and Influence Activities in the Public Sector: the Trade-off in Performance Budgeting and Conditional Grants By Ivo Bischoff; Frédéric Blaeschke
  19. Contributions of young scholars in team-based scientific research By IGAMI, Masatsura; NAGAOKA, Sadao; WALSH, John P.
  20. Director Shareownership and Corporate Performance in South Africa By Ntim, Collins G
  21. Life Expectancy, Schooling, and Lifetime Labor Supply: Theory and Evidence Revisited By Cervellati, Matteo; Sunde, Uwe

  1. By: E. Glenn Dutcher; Loukas Balafoutas; Florian Lindner; Dmitry Ryvkin; Matthias Sutter
    Abstract: Managers often use tournaments which motivate workers to compete for the top, compete to avoid the bottom, or both. In this paper we compare the effectiveness and efficiency of the corresponding incentive schemes. To do so, we utilize optimal contracts in a principal-agent setting, using a Lazear-Rosen type model that predicts equal effort and efficiency levels for the three mechanisms with the appropriate distribution of prizes. We test the model's predictions in a laboratory experiment and find that a mechanism which incorporates both competition for the top and away from the bottom produces the highest effort from agents, especially in contests of a relatively larger size. Avoiding being last is shown to produce the lowest variance of effort, be more effective and, in larger contests, more efficient than competing for the top. Finally, we show that behavior in all mechanisms is consistent with basic directional and reinforcement learning.
    Keywords: tournament, reward, punishment, promotion, firing, contract, experiment, learning
    JEL: M52 J33 J24 D24 C90
    Date: 2013–03
  2. By: Tonin, Mirco (University of Southampton); Vlassopoulos, Michael (University of Southampton)
    Abstract: In this paper we investigate the relationship between earnings and charitable giving. We set up a real effort experiment, in which subjects enter data in four one-hour occasions and are paid a piece rate. From the second occasion onwards, we randomly assign half of the subjects to a treatment with higher piece rates. At the end we ask subjects whether they want to donate a share of their earnings to a charity of their choice. We find that, despite large differences in earnings due to the different piece rates, subjects receiving the higher piece rate are actually less likely to give, and that givers in the two groups give the same share of their total earnings. Charities receive the same average donation from members of the two groups indicating that subjects in this experiment do not treat charitable giving as a normal good.
    Keywords: charity, earnings, luck, effort, windfall
    JEL: D64 J39
    Date: 2013–03
  3. By: Tansel, Aysit (Middle East Technical University); Gazioglu, Saziye (Middle East Technical University)
    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 measures 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: 2013–03
  4. By: Jerome Adda (Institute for Fiscal Studies and European University Institute); Christian Dustmann (Institute for Fiscal Studies and University College London); Costas Meghir (Institute for Fiscal Studies and Yale University); Jean-Marc Robin (Institute for Fiscal Studies and Sciences Po)
    Abstract: This paper analyses 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 labour market entry onwards and estimate a dynamic life-cycle model of vocational training choice, labour supply and wage pogression. Most particularly, our model allows for labour 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 labour 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 lack of mobility.
    Keywords: Wage determination, skills, business cycles, apprenticeship training, job mobility
    Date: 2013–03
  5. By: Kohei Daido (School of Economics, Kwansei Gakuin University); Kimiyuki Morita (Graduate School of Commerce and Management, Hitotsubashi University); Takeshi Murooka (Department of Economics, University of California-Berkeley); Hiromasa Ogawa (Graduate School of Economics, University of Tokyo)
    Abstract: We analyze a simple task-assignment model in which a principal assigns a task to one of two agents depending on the state. If the agents have standard concave utility, the principal assigns the task to an agent with the highest productivity in each state. In contrast, if the agents are loss averse, in order to alleviate their expected losses the principal may assign the task to a single agent in all states. Furthermore, the optimal contract may specify the same effort level across states. Our results imply that such simple contracts can be optimal even when employers can write contingent contracts at no cost.
    Keywords: task assignment, loss aversion, reference-dependent preferences
    JEL: D03 D86 M12 M52
    Date: 2013–03
  6. By: Gerald Eisenkopf (Department of Economics, University of Konstanz, Germany)
    Abstract: The heterogeneous effort supply in intergroup contests explains why groups have a manager. However, the objectives of group managers and members often differ. Using data from an experiment this paper studies whether this conflict of interests affects leadership effectiveness. The managers have an advisory role only and cannot change the monetary incentives of the group members in any context. Depending on the treatment some managers prefer more competition than the group members, some less, and some do not have any incentive at all. The results show that managers can coordinate their groups rather effectively. Their incentives shape the competitive behavior of the 'subordinates'. However group members follow the non-binding investment recommendations of their group manager more closely if management compensation is not incentivized.
    Keywords: Communication, Experiment, Rent-seeking, Management compensation, Group decision making
    JEL: C72 C92 D72 D74 M12
    Date: 2013–03–26
  7. By: Dietrich Vollrath (University of Houston)
    Abstract: For a set of 14 developing countries I evaluate whether differences in the marginal product of human capital between sectors - estimated from individual-level wage data - have meaningful effects on aggregate productivity. Under the most generous assumptions regarding the homogeneity of human capital, my analysis shows that equalizing the marginal product of human capital between sectors leads to gains in output of less than 5% for most countries. These estimated gains of reallocation represent an upper bound as some of the observed differences in marginal products between sectors are due to unmeasured human capital. Under reasonable assumptions on the amount of unmeasured human capital the gains from reallocation fall well below 3%. Compared to similar estimates made using data from the U.S., developing countries would gain more from a reallocation of human capital, but the differences are too small to account for a meaningful portion of the gap in income per capita with the United States.
    Keywords: Misallocation, human capital, aggregate productivity, structural transformation, wage differentials
    JEL: O12 O15 O47 O57 J31
    Date: 2013–03–15
  8. By: Zhiguo He; Si Li; Bin Wei; Jianfeng Yu
    Abstract: Uncertainty has qualitatively different implications than risk in studying executive incentives. We study the interplay between profitability uncertainty and moral hazard, where profitability is multiplicative with managerial effort. Investors who face greater uncertainty desire faster learning, and consequently offer higher managerial incentives to induce higher effort from the manager. In contrast to the standard negative risk-incentive trade-off, this "learning-by-doing" effect generates a positive relation between profitability uncertainty and incentives. We document empirical support for this prediction.
    Date: 2013
  9. By: MORI Tomoharu
    Abstract: This paper investigates the effect of minimum wages on workers' effort levels (motivation) using an economic experiment conducted in a laboratory. Under the gift-exchange theory, if firms pay higher wages, workers exert more effort. Vice versa, if firms pay lower wages, workers exert less effort. Minimum wages affect the judgment as to whether the wages being paid are high or low. In general, wages near the minimum appear unattractive. However, it is possible that the same level of wage will appear attractive if minimum wages did not exist. Moreover, the existence of minimum wages affects unemployment. Under larger unemployment, the effort level of workers is higher since being employed is more valuable. The result of the experiment shows the two following points. First, in the case where all workers are hired and unemployment does not exist, minimum wages decrease effort level (conditioned by wage). The reason is that minimum wages increase the "reference wage" and the higher wage is needed to induce the same effort level. Second, in the case where workers can be rejected from being hired by a firm and are unemployed, minimum wages does not change (and sometimes increase) the effort level. The result implies that minimum wages do not change the worst case (being unemployed) and do not change reference wages. In addition, the increase in unemployment due to minimum wages may increase effort levels.
    Date: 2013–03
  10. By: Ahlin, Lina (CIRCLE, Lund University); Andersson, Martin (CIRCLE, Lund University); Thulin, Per (Royal Institute of Technology and Swedish Entrepreneurship Forum)
    Abstract: We analyze the influence of market thickness for skills on initial wages and subsequent wage development of university graduates. Using Swedish micro-level panel data on a cohort of graduates, we show that two out of three graduates move to large cities upon graduation. Large cities yield higher rewards to human capital and a stronger early job market career. The premium on initial wages for urban graduates is in the interval of 6-12 percent, and we estimate a wage-growth premium of about 3 percent. Thicker markets for skills appear as a key reason for the concentration of university graduates to larger cities.
    Keywords: human capital; university graduates; urban wage premium; market thickness; matching; agglomeration economies; migration; job switching
    JEL: J31 J61 R10 R12
    Date: 2013–02–14
  11. By: DUPUY Arnaud
    Abstract: This paper presents a general equilibrium assignment model of workers to tasks with endogenous supply of skills. The model has 2 key features. First, skills are endogenous and multidimensional. Second, two types of assignment occur; workers self-select the type of skills to supply and firms assign workers to tasks/machines. Equilibrium is characterized by two functions mapping skills of each type to tasks and two wage functions, one for each type of skills, so that the wage distributions generally overlap. The model shows that the impact of any given skill-biased technical change on wage inequality is tightly related to the distribution of skills in the population. Productivity effects can be over or under estimated by wage data when the supply of skills is endogenous. The model also shows that Johnson?s (1997) distinction between intensive and extensive technical change is impossible when supply is endogenous.
    Keywords: tasks assignment; endogenous supply of skills; multidimensional skills; human capital; technical change and usage distribution
    JEL: D30 J21 J23 J31
    Date: 2013–03
  12. By: Herbst, Mikolaj; Rok, Jakub
    Abstract: According to economic theory, supported by rich empirical evidence, the ability of an economy to accumulate a high quality human capital is an important factor of economic growth. Since economies better endowed with human capital grow at a higher rate, the mobility of skilled individuals should have a meaningful effect on the economic perspectives of different countries and regions. In this paper we attempt to systematise the existing literature on the impact that human capital mobility has on economic growth and some other aspects of regional development, in order to better understand the channels through which this impact is accomplished and the significance of the observed effects. We complement it with a typology of drivers of highly skilled migration and, finally, we focus on policy efforts at the regional level that aim at raising the human capital level in a region.
    Keywords: human capital, migration, regional development
    JEL: I25 I28 J6 J61
    Date: 2013–03–01
  13. By: Raouf Boucekkine (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM), IRES-CORE - Université Catholique de Louvain); Natali Hritonenko (Prairie View - A&M University); Yuri Yatsenko (School of business, Houston Baptist University - Houston Baptist University)
    Abstract: Work significantly affects human life and health. Overworking may decrease the quality of life and cause direct economic losses. Technological innovations encourage modernization of firms' capital and improve labor productivity in the workplace. The paper investigates the optimal individual choice of work intensity under improving technology embodied in new equipment leading to shorter lifetime of capital goods (obsolescence). The balanced growth trajectories are analyzed in this context to find out, in particular, how the optimal choice of work intensity is tied to the rate of embodied technological change. The impact of embodied technological advances on the work/life balance problem is discussed and their macroeconomic consequences are highlighted.
    Keywords: work-life balance; rational individual choice; technological development; vintage capital
    Date: 2013–03
  14. By: Cordoba, Juan Carlos; Ripoll, Marla
    Abstract: This paper provides a theory that explains the cross-country distribution of average years of schooling, as well as the so called human capital premium puzzle. In our theory, credit frictions as well as differences in access to public education, fertility and mortality turn out to be the key reasons why schooling differs across countries. Differences in growth rates and in wages are second order.
    Keywords: human capital; life expectancy; per capita income di§erences; public education spend- ing; life cycle model
    JEL: I J O
    Date: 2013–03–01
  15. By: Utteeyo Dasgupta (Franklin and Marshall College); Subha Mani (Fordham University)
    Abstract: In an artefactual field experiment, we introduce a novel allocation game to investigate the role of procedural altruism in household decision-making and study choices of married spouses. Subjects can distribute their earnings from the experiment either on food items (joint consumption good), or on gender specific personal clothing (private consumption good). Subjects’ consumption choices are observed under two treatments – earnings with effort, and earnings without effort. At the aggregate we find that subjects exhibit a strong preference for own private consumption good when assigned to the effort treatment. However, further scrutiny suggests that women’s choice for the joint consumption good in the household remains largely independent of the treatment. In contrast, men exhibit a strong preference for private consumption good in the effort treatment.
    Keywords: Procedural utility, Household decision making, Gender, Experiment
    JEL: C93 D1 Z1
  16. By: Kaiser, Ulrich (University of Zurich); Müller, Bettina (ZEW Mannheim)
    Abstract: We investigate the workforce heterogeneity of startups with respect to education, age and wages. Our explorative study uses data on the population of 1,614 Danish firms founded in 1998. We track these firms until 2001 which enables us to analyze changes in workforce composition over time. Such a dynamic analysis constitutes a hitherto neglected area of entrepreneurship research. To assess relative workforce heterogeneity, we construct a simulated benchmark to which we compare observed workforce heterogeneity. We find that the initial workforce is relatively homogeneous compared to our benchmark. Our result holds both for non-knowledge-based and, to a lesser extent, knowledge-based startups. This seems surprising since a vast management literature advocates heterogeneous teams. The difficulties associated with workforce heterogeneity (like affective conflict or coordination cost) as well as "homophily" (people's inclination to bound with others with similar characteristics) hence appear to generally overweigh the benefits of heterogeneity (like greater variety in perspectives or more creativity). We also document that workforces become more heterogeneous over time – startups add workers with skills different from the workforce at startup. The initial supposedly "poor" mix of workforce characteristics is hence adjusted as the startup matures. This increase in workforce heterogeneity is, however, smaller compared to our benchmark but substantially larger than is team additions had the same characteristics as the initial team members.
    Keywords: entrepreneurship, start-ups, skill heterogeneity, team dynamics
    JEL: C10 L26 M13
    Date: 2013–03
  17. By: Kumar, Surender; Kumar, Sudesh
    Abstract: This paper aims to measure the role of police modernization scheme in its performance in crime repression. We use output distance function as an analytical tool and estimate it using stochastic frontier analysis (SFA) framework in a ‘single stage’. We find that the police modernization scheme is helping the state police departments in enhancing their performance, i.e., the police departments which have more modern communication equipments and which are spending more money on the training of their police personnel are doing better. The police density is found to be one of the major determinants of its efficiency along with the factors that create more social cohesion. The total factor productivity (TFP) is governed by the catch-up effect which is worsening over time though the technological progress has been observed in most of the states.
    Keywords: Police, Performance Measurement, Modernization, Stochastic Frontier Analysis, India
    JEL: H59 H76 K14
    Date: 2013
  18. By: Ivo Bischoff (University of Kassel); Frédéric Blaeschke (University of Kassel)
    Abstract: Performance budgeting schemes in the public sector have to operate with imperfect performance measures. We argue that these imperfections generate incentives for the potential recipients of performance-based funds to use up resources in socially wasteful influence activities. We develop a game-theoretical model to analyse the trade-off between the efficiency-enhancing effect of performance budgeting and the social waste it induces. Comparing a performance signal based on recipients’ effort to a signal based on their output shows that a) the former evokes more social waste while the latter amplifies inequality in the amount of public services across districts. Performance budgeting schemes using the outputbased signal yield welfare gains in a wide range of parameter constellations while the applicability of PB-schemes using the effort-based signal is limited. We also show that welfare losses arise when the government is opportunistic. Our model can be applied to the very similar trade-off emerging with the use of conditional grants in federalist countries.
    Keywords: Performance budgeting, rent-seeking, bureaucracy, public-sector production, conditional grants, opportunistic government
    JEL: D7 H77 H5 H11
    Date: 2013
  19. By: IGAMI, Masatsura; NAGAOKA, Sadao; WALSH, John P.
    Abstract: How to design and manage a research team has become an increasingly important issue in knowledge creation in science. This paper aims to understand how young scholars contribute to scientific research in the context of a research team. We have found that the likelihood of the involvement of postdoctoral fellows is high in research teams working on a rapidly advancing research theme, facing competitive threat, and in those research teams with foreign-born scholars and when exploiting advanced research equipment. Focusing on the papers where the order of the authors follows contribution, the probability of postdoctoral fellows becoming the first authors is more likely to exceed that due to a random assignment in the research teams facing competitive threat, with foreign-born postdoctoral scholars and when exploiting advanced research equipment. Finally, we have found that the involvement of postdoctoral fellows is positively associated with research performance in terms of citation counts and with shorter time to the publication even if the size of project is controlled for. The finding that postdoctoral fellows accelerate the speed of research is consistent with the fact that they become more likely to be the first authors in the face of strong scientific competition. These findings illuminate how young scholars contribute to the teambased research.
    Keywords: Team, Young scholars, Science, First Author, Competition
    JEL: O30 D23
    Date: 2013–01
  20. By: Ntim, Collins G
    Abstract: This paper investigates the relationship between director shareownership and corporate performance in South Africa using a sample of 169 listed firms from 2002 to 2007. Our results suggest a statistically significant and positive association between director shareownership and corporate performance. By contrast, we find no evidence of a non-linear effect of director shareownership on corporate performance. Our findings are robust across a raft of econometric models that control for different types of endogeneity problems and corporate performance proxies. Overall, our results provide support for agency theory, which suggests that director shareownership can reduce agency problems by aligning more closely the interests of shareholders and corporate executives, and thereby improving corporate performance.
    Keywords: corporate governance, corporate performance, director shareownership, South Africa, endogeneity
    JEL: G32 G34 G38
    Date: 2012–12–29
  21. By: Cervellati, Matteo (University of Bologna); Sunde, Uwe (University of Munich)
    Abstract: This paper presents a theoretical and empirical analysis of the role of life expectancy for optimal schooling and lifetime labor supply. The results of a simple prototype Ben-Porath model with age-specific survival rates show that an increase in lifetime labor supply is not a necessary, nor a sufficient, condition for greater life expectancy to increase optimal schooling. The observed increase in survival rates during working ages that follows from the "rectangularization" of the survival function is crucial for schooling and labor supply. The empirical results suggest that the relative benefits of schooling have been increasing across cohorts of US men born 1840-1930. A simple quantitative analysis shows that a realistic shift in the survival function can lead to an increase in schooling and a reduction in lifetime labor hours.
    Keywords: longevity, life expectancy, schooling, lifetime labor supply, rectangularization of the survival function
    JEL: E20 J22 J24 J26 O11
    Date: 2013–03

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.