nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2013‒06‒09
sixteen papers chosen by
Tommaso Reggiani
University of Cologne

  1. Market-based incentives By Borys Grochulski; Yuzhe Zhang
  2. Female labour supply, human capital and welfare reform By Richard Blundell; Monica Costa Dias; Costas Meghir; Jonathan Shaw
  3. Motivating Knowledge Agents: Can Incentive Pat Overcome Social Distance? By Erlend Berg; Maitreesh Ghatak; R. Manjula; D. Rajasekhar; Sanchari Roy
  4. Are multinational teams more successful? By Hartmut Haas; Stephan Nuesch
  5. Human Capital, Polarization, and Pareto-Improving Activating Welfare By Peter Funk
  6. For Love or Money? Motivating Workers By Saima Naeem; Asad Zaman
  7. Worker Identity, Employment Fluctuations and Stabilization Policy By Snower, Dennis J.; Lechthaler, Wolfgang
  8. Do Preferences for Job Attributes Provide Evidence of 'Hierarchy of Needs' By Cem BaÅŸlevent; Hasan KirmanoÄŸlu
  9. Fishing for excuses and performance evaluation By François Larmande; Jean-Pierre Ponssard
  10. Incentive Contracts and Efficient Unemployment Benefits in a Globalized World By Carsten Helm; Dominique Demougin
  11. Teaching KAIZEN to Small Business Owners: An Experiment in a Metalworking Cluster in Nairobi By Yukichi Mano; John Akoten; Yutaka Yoshino; Tetsushi Sonobe
  12. Competitiveness in dynamic group contests: Evidence from combined field and lab data By Yann Girard; Florian Hett
  13. Does Productivity Decline after Promotion? The Case of French Academia By Mareva Sabatier
  14. Time Investment by Parents in Cognitive and Non-cognitive Childcare Activities By Sepahvand, Mohammad; Shahbazian, Roujman; Bali Swain, Ranjula
  15. Entrepreneurship and Human Capital: Empirical study using a survey of entrepreneurs in Japan By BABA Ryota; MOTOHASHI Kazuyuki
  16. Why firms avoid cutting wages: survey evidence from European firms By Philip Du Caju; Theodora Kosma; Martina Lawless; Tairi Rõõm

  1. By: Borys Grochulski; Yuzhe Zhang
    Abstract: We study optimal incentives in a principal-agent problem in which the agent's outside option is determined endogenously in a competitive labor market. In equilibrium, strong performance increases the agent's market value. When this value becomes sufficiently high, the threat of the agent's quitting forces the principal to give the agent a raise. The prospect of obtaining this raise gives the agent an incentive to exert effort, which reduces the need for standard incentives, like bonuses. In fact, whenever the agent's option to quit is close to being "in the money," the market-induced incentive completely eliminates the need for standard incentives.
    Keywords: Labor market
    Date: 2013
  2. By: Richard Blundell (Institute for Fiscal Studies and University College London); Monica Costa Dias (Institute for Fiscal Studies and Institute for Fiscal Studies); Costas Meghir (Institute for Fiscal Studies and Yale University); Jonathan Shaw (Institute for Fiscal Studies)
    Abstract: We consider the impact of tax credits and income support programs on female education choice, employment, hours and human capital accumulation over the life-cycle. We analyse both the short run incentive effects and the longer run implications of such programs. By allowing for risk aversion and savings, we quantify the insurance value of alternative programs. We find important incentive effects on education choice and labour supply, with single mothers having the most elastic labour supply. Returns to labour market experience are found to be substantial but only for full-time employment, and especially for women with more than basic formal education. For those with lower education the welfare programs are shown to have substantial insurance value. Based on the model, marginal increases to tax credits are preferred to equally costly increases in income support and to tax cuts, except by those in the highest education group.
    Date: 2013–05
  3. By: Erlend Berg; Maitreesh Ghatak; R. Manjula; D. Rajasekhar; Sanchari Roy
    Abstract: This paper studies the interaction of incentive pay and social distance in the dissemination of information.  We analyse theoretically as well as empirically the effect of incentive pay when agents have pro-social objectives, but also preferences over dealing with one social group relative to another.  In a randomised field experiment undertaken across 151 villages in South India, local agents were hired to spread information about a public health insurance programme.  Relative to flat pay, incentive pay improves knowledge transmission to households that are socially distant from the agent, but not to households similar to the agent.
    Keywords: Public services, information constraints, incentive pay, social proximity, knowledge transmission
    Date: 2013–03–29
  4. By: Hartmut Haas (Towers Watson, Executive Compensation); Stephan Nuesch (Department of Business Administration, University of Zurich)
    Abstract: Teams have become increasingly multinational in many sectors. The impact of national diversity on team performance is controversial, however. On the one hand, multinational teams may have access to a greater variety of task-relevant expertise, which should increase team performance. On the other hand, national diversity may complicate team collaboration and increase team conflict. Applying panel econometrics to 4,284 team observations in a globalized sector, we find evidence that multinational teams perform worse than teams with less national diversity.
    Keywords: Controlled field environment, multinational teams, national diversity, professional sports, professional sports, team performance
    Date: 2013–05
  5. By: Peter Funk
    Abstract: Human capital not only generates market income but is a direct source of utility as well. The interaction between the non-economic motive for effort and the standard economic motive can generate multiple stationary solutions for individual household optimization. Depending on the initial distribution of skills, this multiplicity divides each group of otherwise identical households into two perpetually separated groups: one rich and educated, one poor and uneducated. If the rich have an interest in the education of the poor, polarized equilibria are typically Pareto-inefficient. While unconditional transfers only reduce the incentive of the uneducated to accumulate skills, there exist activating tax-transfer systems that Pareto-dominate any non-redistributing system. Transfers are transitory and there is a negative marginal income tax on household income below a certain threshold.
    JEL: D91 H21 I30
    Date: 2013–04–01
  6. By: Saima Naeem (Pakistan Institute of Development Economics, Islamabad); Asad Zaman (Pakistan Institute of Development Economics, Islamabad)
    Abstract: We conducted a field experiment and tested how employers can use socioemotional resources, such as appreciation and recognition, in order to signal intentions and create positive reciprocal relationships with employees. Results showed that these resources led to a significant gain in productivity. The study was extended to account for relative wage concerns both with and without appreciation treatment. Efficiency gains with appreciation appeared to be robust even after including information regarding relatively disadvantageous wage discrimination. However, workers’ without socioemotional resources exhibited strong resentment toward relatively lower wages by showing a significant systematic decrease in their labour supply. Our results suggest that workers not only compare their wages, as pointed out in previous literature, but also compare the socioemotional resources provided by their employer. This provides important evidence against one-dimensional comparisons of relative wages relevant to worker productivity.
    Keywords: Appreciation, Recognition, Symbolic Gift Exchange, Wage Comparisons
    JEL: C93 M5 J31 J32 J53
    Date: 2013
  7. By: Snower, Dennis J. (Kiel Institute for the World Economy); Lechthaler, Wolfgang (Kiel Institute for the World Economy)
    Abstract: This paper provides a model of "social hysteresis" whereby long, deep recessions demotivate workers and thereby lead them to change their work ethic. In switching from a pro-work to an anti-work identity, their incentives to seek and retain work fall and consequently their employment chances fall. In this way, temporary recessions may come to have permanent effects on aggregate employment. We also show that these permanent effects, along with the underlying identity switches, can be avoided through stabilization policy. The size of the government expenditure multiplier can be shown to depend on the composition of identities in the workforce.
    Keywords: economics of identity, work ethic, hysteresis, business cycle policy
    JEL: E24 E60 J21 J28
    Date: 2013–05
  8. By: Cem BaÅŸlevent (Department of Economics, Istanbul Bilgi University); Hasan KirmanoÄŸlu (Department of Economics, Istanbul Bilgi University)
    Abstract: We examine whether employees’ preferences for various job attributes are associated with their individual characteristics in ways that are in line with ‘hierarchy of needs’ theories. Using data from the fifth round of the European Social Survey, we observe the influence of socio-demographic and dispositional characteristics as well as socialization experiences on opinions regarding the importance of five different desirable job attributes. An item-by-item examination of the attributes (including ‘security’ and ‘offering a high income’) reveals that dispositional factors (measured using the battery of items in Schwartz’s theory of basic personal values) influence job attitudes in expected ways, but employees also tend to place more importance on attributes that concern them more directly. For example, while female employees care more about being able to combine work and family responsibilities, younger workers value training opportunities more highly than older ones. Regarding socialization experiences, we find that job security is more important for those who have been unemployed in the past. We interpret our findings to mean that hierarchy of needs theories are valid in the context of job attitudes in the sense that the ranking of preferred job attributes is quite predictable once individual characteristics are accounted for.
    Keywords: preferred job attributes, hierarchy of needs, basic personal values, European Social Survey
    JEL: C25 J28
    Date: 2012–01
  9. By: François Larmande (EM-Lyon Business School); Jean-Pierre Ponssard (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)
    Abstract: We study a principal-agent model in which the agent can provide ex post additional relevant information regarding his performance. In particular, he can provide a legitimate excuse, that is, evidence that a poor result is only due to factors outside his control. However, building a convincing case requires time, time that is not spent on exerting productive eff ort, and thus generating information represents an opportunity cost. We obtain necessary and suffi cient conditions for the principal to prefer a policy of adjusting ex post the performance measure for the information provided by the agent to a policy of conforming to a result-based system with no adjustments. The risk aversion and a possible limited liability of the agent play an important role in the analysis. This paper clarifi es the issues asso- ciated with the so-called \excuse culture" prevailing in some organizations.
    Keywords: Performance measurement Manipulation Controllability principle Excuse culture Influence activity
    Date: 2013–05–23
  10. By: Carsten Helm (University of Oldenburg); Dominique Demougin (European Business School at the EBS University, Wiesbaden)
    Abstract: Several European countries have reformed their labor market institutions. Incentive effects of unemployment benefits have been an important aspect of these reforms. We analyse this issue in a principal-agent model, higher level of unemployment benefits improves the workers' position in wage bargaining, leading to stronger effort incentives and higher output. However, it also reduces incentives for labor market participation. Accordingly, there is a trade-off. We analyze how changes in the economic environment such as globalization and better educated workers affect this trade-off.
    Keywords: Unemployment benefits, incentive contracts, Nash bargaining, moral hazard, globalization
    JEL: J65 D82 J41 E24
    Date: 2012–08
  11. By: Yukichi Mano (Hitotsubashi University, Tokyo); John Akoten (Anti-Courterfeit Agency, Nairobi); Yutaka Yoshino (World Bank, Washington D.C.); Tetsushi Sonobe (National Graduate Institute for Policy Studies)
    Abstract: In recent years, managerial capital has received attention as one of the major determinants of enterprise productivity, growth, and longevity. This paper attempts to assess the impacts of a management training program on the business performance of small enterprises in a metalworking cluster in Nairobi, Kenya. A previous study of this cluster observed that while several enterprises had successfully expanded operation, the majority had been experiencing declining profits due to increasing competition with imported products and with new entrants in the cluster. Based on the observed differences in management between successful and less successful enterprises, we designed a management training program featuring the basics of KAIZEN, an inexpensive, commonsense approach to management emphasizing the reduction of wasted work and materials, for the less successful enterprises. Although our initial intention was to use this training program as a randomized experiment, we had to abandon randomization and allow every business owner interested in the program to participate in it, due to circumstances beyond our control. This paper finds that business owners operating smaller enterprises tended to be self-selected into training participation. The training effects combined with the self-selection effect, which we estimate with panel data, were statistically significant and particularly stronger on profits than on sales revenues, while other training programs that did not teach KAIZEN had positive effects on sales revenues, not profits. As a result, the participants caught up with and overtook the non-participants in terms of average sales revenues and average profits, respectively.
    Date: 2013–05
  12. By: Yann Girard (GSEFM, Goethe University Frankfurt, Germany); Florian Hett (GSEFM, University of Mainz, Germany)
    Abstract: We analyse data from a field setting in which students participate in a dynamic group contest with feedback. We combine this information with a laboratory measure of competitiveness. We ?nd that competitive groups perform worse overall. In addition, we find that participants react to intermediate performance: A better rank in a given period increases the number of points in the subsequent period, even after controlling for group and time fixed effects. The effect is significantly stronger for competitive groups. We show that this difference in the sensitivity to dynamic incentives can explain the overall negative effect of competitiveness on performance.
    Keywords: Dynamic contest, competitiveness, field experiments, lab experiments, rank feedback
    JEL: C91 C93 D03 D74 I21
    Date: 2013–04–01
  13. By: Mareva Sabatier (IREGE - Institut de Recherche en Gestion et en Economie - Université de Savoie)
    Abstract: The present research examined the effect of promotion decisions on ex-post productivity in French academia. As, once promotion decisions are known, most external incentives vanish for promoted candidates, their productivity was expected to decrease. This hypothesis was tested by using an original dataset and matching methods to evaluate the impact of promotion on publication scores. The robustness of the matching estimates was tested using sensitivity analysis. The results clearly show that the removal of extrinsic incentives following promotion does not lead to a fall in productivity in French academia.
    Keywords: promotions ; extrinsic and intrinsic incentives ; academic career
    Date: 2012–09–01
  14. By: Sepahvand, Mohammad (Department of Economics); Shahbazian, Roujman (Swedish Institute for Social Research (SOFI),); Bali Swain, Ranjula (Department of Economics)
    Abstract: We investigate the time investment in cognitive and non-cognitive childcare activities by parents with different educational attainment. In a second step we also investigate this effect for three different child age cohorts. Past research shows that the degree of success in the labour market is highly connected to the individual’s cognitive and non-cognitive skills. We compare evidence based on Multinational Time Use Study (MTUS) for five countries: France, Netherlands, Spain, United Kingdom and United States of America in order to identify any systematic pattern. The results indicate that the educational gradients for cognitive and non-cognitive childcare activities are overall positive with respect to the level of education. Furthermore, the results seem to be consistent with the technology of skill formation. They indicate a concave function between time investment and the age of the child for cognitive childcare activities and a decreasing function for non-cognitive childcare activities.
    Keywords: Time allocation; cognitive skills; non-cognitive skills; intergenerational transmissions; human capital; technology of skill formation
    JEL: I21 J13
    Date: 2013–05–07
  15. By: BABA Ryota; MOTOHASHI Kazuyuki
    Abstract: Entrepreneurship activities are low in Japan, and it is often discussed that possible reasons are the lack of venture capital and a rigid labor market. However, it is rare to find a study that analyzes the human capital aspect of entrepreneurs based on a large scale sample survey. In this study, the characteristics of the human capital of entrepreneurs, such as education and job experience, are analyzed based on a survey of entrepreneurs conducted by the Research Institute of Economy, Trade and Industry (RIETI) in 2012. The entire process of entrepreneurship is divided into three phases—(1) planning, (2) execution, and (3) achieving success in business—and the determinants of each step, not only the education and job background, but also personal relationships with the entrepreneur and his/her personality, are investigated. It is found that broad experiences while attending universities such as extra-curriculum activities are an important factor at the planning and execution stage. In contrast, broader job experiences but within a limited number of companies can explain the probability of entrepreneurship success well. Therefore, promotion of entrepreneurship activity in Japan including forming a spin-off company requires both a variety of extra-curriculum activities experienced at universities and facilitating employees to develop broad professional experiences.
    Date: 2013–05
  16. By: Philip Du Caju; Theodora Kosma; Martina Lawless; Tairi Rõõm
    Abstract: The rarity with which firms reduce nominal wages has been frequently observed, even in the face of considerable negative economic shocks. This paper uses a unique survey of fourteen European countries to ask firms directly about the incidence of wage cuts and to assess the relevance of a range of potential reasons for why they avoid cutting wages. Concerns about the retention of productive staff and a lowering of morale and effort were reported as key reasons for downward wage rigidity across all countries and firm types. Restrictions created by collective bargaining were found to be an important consideration for firms in euro area countries but were one of the lowest ranked obstacles in non-euro area countries. The paper examines how firm characteristics and collective bargaining institutions affect the relevance of each of the common explanations put forward for the infrequency of wage cut
    Keywords: labour costs, wage rigidity, firm survey, wage cuts, European Union
    JEL: J30 J32 J33 J51 C81 P5
    Date: 2013–05–24

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.