nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2013‒06‒16
twenty-one papers chosen by
Tommaso Reggiani
University of Cologne

  1. Employment Relations and Wages: What Can We Learn from Subjective Assessments? By Marta Lachowska
  2. How to Hire Helpers? Evidence From a Field Experiment By Julian Conrads; Bernd Irlenbusch; Tommaso Reggiani; Rainer Michael Rilke; Dirk Sliwka
  3. Exit Options and the Allocation of Authority By Bester, Helmut; Krähmer, Daniel
  4. Subjective Evaluation versus Public Information By Bester, Helmut; Münster, Johannes
  5. How Effective are Pay-for-Performance Incentives for Physicians? – A Laboratory Experiment By Jeannette Brosig-Koch; Heike Hennig-Schmidt; Nadja Kairies; Daniel Wiesen
  6. How do Non-Monetary Performance Incentives for Physicians Affect the Quality of Medical Care? – A Laboratory Experiment By Nadja Kairies; Miriam Krieger
  7. The Role of Task Meaning on Output in Groups: Experimental Evidence By Agnes Baeker; Mario Mechtel
  8. Indirect Incentives of Hedge Fund Managers By Lim, Jongha; Sensoy, Berk A.; Weisbach, Michael S.
  9. Productivity and age: Evidence from work teams at the assembly line By Weiss M.; B?rsch-Supan A.
  10. Do First Impressions Matter? Improvement in Early Career Teacher Effectiveness By Allison Atteberry; Susanna Loeb; James Wyckoff
  11. Good Firms, Worker Flows and Productivity By Serafinelli, Michel
  12. How to Improve Patient Care? – An Analysis of Capitation, Fee-for-Service, and Mixed Payment Schemes for Physicians By Jeannette Brosig-Koch; Heike Hennig-Schmidt; Nadja Kairies; Daniel Wiesen
  13. The Decisions of Entrepreneurs and Their Agents: Revealed Levels of Risk Aversion and Betrayal Aversion By Dreber, Anna; Rand, David; Wernerfelt, Nils; Worrell, Peter; Zeckhauser, Richard
  14. Managing the teaching-research nexus: ideals and practice in research oriented universities By Geschwind, Lars; Broström, Anders
  15. Financing human capital development via government debt: a small country case using overlapping generations framework By Stauvermann, Peter Josef; Kumar , Ronald
  16. Peer Discipline and the Strength of Organizations By David K Levine; Salvatore Modica
  17. Matching worker skills to job tasks in the Netherlands: Sorting into cities for better careers By Suzanne Kok
  18. Occupational Choice and the E¤ects of Skill Supply on Relative Wages By Gregory Kurtzon
  19. Life satisfaction and education in South Africa: Investigating the role of attainment and the likelihood of education as a positional good By Ferdi Botha
  21. Differential Fertility, Human Capital, and Development By Tom Vogl

  1. By: Marta Lachowska (W.E. Upjohn Institute for Employment Research)
    Abstract: This paper studies the link between hourly wages and workers’ subjective assessments of how easy it would be to find another job as good as the present one, and how easy it would be for an employer to replace an employee. First, using high-quality data, I study the correlates of these two assessments. Second, I study whether respondents who report better outside opportunities and respondents who think they are difficult to replace receive higher wages. The results appear to be consistent with predictions of at least three theoretical frameworks: human capital theory, search theory, and a “locus of control” model.
    Keywords: Wages, Employment Relations, Outside Options, Human Capital, Locus of Control, Labor Market Frictions
    JEL: J31 J41 J50 M51
    Date: 2013–05
  2. By: Julian Conrads (University of Cologne); Bernd Irlenbusch (University of Cologne); Tommaso Reggiani (University of Cologne); Rainer Michael Rilke (University of Cologne); Dirk Sliwka (University of Cologne)
    Abstract: How to hire voluntary helpers? We shed new light on this question by reporting a field experiment in which we invited 2,859 students to help at the 'ESA Europe 2012' conference. Invitation emails varied non-monetary and monetary incentives to convince subjects to offer help. Students could apply to help at the conference and, if so, also specify the working time they want to offer. Just asking subjects to volunteer or offering them a certificate turned out to be significantly more motivating than mentioning that the regular conference fee would be waived for helpers. Increasing monetary incentives by varying hourly wages of 1, 5, and 10 Euros shows positive effects on the number of applications and on the working time offered. However, when comparing these results with treatments without any monetary compensation, the number of applications could not be increased by offering money and may even be reduced.
    Keywords: Recruitment, Voluntary work, Monetary incentives, Field experiment
    JEL: C93 J33 M52
    Date: 2013–05–29
  3. By: Bester, Helmut; Krähmer, Daniel
    Abstract: We analyze the optimal allocation of authority in an organization whose members have conflicting preferences. One party has decision-relevant private information, and the party who obtains authority decides in a self-interested way. As a novel element in the literature on decision rights, we consider exit option contracts: the party without decision rights is entitled to prematurely terminate the relation after the other party's choice. We show that under such a contract it is always optimal to assign authority to the informed and not to the uninformed party, irrespective of the parties' conflict of interest. Indeed, the first-best efficient solution can be obtained by such a contract.
    Keywords: Authority; decision rights; exit options; incomplete contracts; asymmetric information
    JEL: D23 D82 D86
    Date: 2013–03–13
  4. By: Bester, Helmut; Münster, Johannes
    Abstract: This paper studies a principal-agent relation in which the principal's private information about the agent's effort choice is more accurate than a noisy public performance measure. For some contingencies the optimal contract has to specify ex post inefficiencies in the form of inefficient termination (firing the agent) or third-party payments (money burning). We show that money burning is the less efficient incentive device: it is used at most in addition to firing and only if the loss from termination is small. Under an optimal contract the agent's wage may depend only on the principal's report and not on the public signal. Nonetheless, public information is valuable as it facilitates truthful subjective evaluation by the principal.
    Keywords: Subjective evaluation; moral hazard; termination clauses; third-party payments
    JEL: D23 D82 D86 J41 M12
    Date: 2013–05–24
  5. By: Jeannette Brosig-Koch; Heike Hennig-Schmidt; Nadja Kairies; Daniel Wiesen
    Abstract: Recent reforms in health care have introduced a variety of pay-for-performance programs using financial incentives for physicians to improve the quality of care. Their effectiveness is, however, ambiguous as it is often difficult to disentangle the effect of financial incentives from the ones of various other simultaneous changes in the system. In this study we investigate the effects of introducing financial pay-for-performance incentives with the help of controlled laboratory experiments. In particular, we use fee-for-service and capitation as baseline payment schemes and test how additional pay-for-performance incentives affect the medical treatment of different patient types. Our results reveal that, on average, patients significantly benefit from introducing pay-forperformance, independently of whether it is combined with capitation or fee-for-service incentives. The magnitude of this effect is significantly infl uenced by the patient type, though. These results hold for medical and non-medical students. A cost-benefit analysis further demonstrates that, overall, the increase in patient benefits cannot overcompensate the additional costs associated with pay-for-performance. Moreover, our analysis of individual data reveals different types of responses to pay-for-performance incentives. We find some indication that pay-forperformance might crowd out the intrinsic motivation to care for patients. These insights help to understand the effects caused by introducing pay-for-performance schemes.
    Keywords: Physician incentive schemes; pay-for-performance; fee-for-service; capitation; laboratory experiment
    JEL: C91 I11
    Date: 2013–05
  6. By: Nadja Kairies; Miriam Krieger
    Abstract: In recent years, several countries have introduced non-monetary performance incentives for health care providers to improve the quality of medical care. Evidence on the effect of non-monetary feedback incentives, predominantly in the form of public quality reporting, on the quality of medical care is, however, ambiguous. This is often because empirical research to date has not succeeded in distinguishing between the effects of monetary and non-monetary incentives, which are usually implemented simultaneously. We use a controlled laboratory experiment to isolate the impact of nonmonetary performance incentives: subjects take on the role of physicians and make treatment decisions for patients, receiving feedback on the quality of their treatment. The subjects’ decisions result in payments to real patients. By giving either private or public feedback we are able to disentangle the motivational eff ects of self-esteem and social reputation. Our results reveal that public feedback incentives have a significant and positive effect on the quality of care that is provided. Private feedback, on the other hand, has no impact on treatment quality. These results hold for medical students and for other students.
    Keywords: Laboratory experiment; quality reporting; feedback; treatment quality; performance incentives
    JEL: I11 C91 L15 I18
    Date: 2013–05
  7. By: Agnes Baeker; Mario Mechtel (Institute for Labour Law and Industrial Relations in the EU, University of Trier)
    Abstract: This paper analyzes experimentally how the interaction of task meaning and peer presence affects work effort. We build on the experimental designs of Falk and Ichino (2006) and Ariely et al. (2008). Confirming previous results from the literature, we find positive peer effects and negative effects of low task meaning. In addition, we find that peer effects are even stronger if task meaning is low. We conclude that a peer setting is able to overcome the negative effort effect of low task meaning.
    Keywords: task meaning, peer effects, experimental economics
    JEL: J20 J30 M50
    Date: 2013–06
  8. By: Lim, Jongha (University of MO); Sensoy, Berk A. (OH State University); Weisbach, Michael S. (OH State University)
    Abstract: Indirect incentives exist in the money management industry when good current performance increases future inflows of new capital, leading to higher future fees. We quantify the magnitude of indirect performance incentives for hedge fund managers. Flows respond quickly and strongly to performance; lagged performance has a monotonically decreasing impact on flows as lags increase up to two years. Conservative estimates indicate that indirect incentives for the average fund are four times as large as direct incentives from incentive fees and returns to managers' own investment in the fund. For new funds, indirect incentives are seven times as large as direct incentives. Combining direct and indirect incentives, for each dollar generated for their investors in a given year, managers receive close to another dollar in direct performance fees plus the present value of future fees over the expected life of the fund. Older and capacity constrained funds have considerably weaker relations between future flows and performance, leading to weaker indirect incentives. There is no evidence that direct contractual incentives are stronger when market-based indirect incentives are weaker.
    JEL: G11 G23
    Date: 2013–03
  9. By: Weiss M.; B?rsch-Supan A. (GSBE)
    Abstract: We study the relation between workers age and their productivity in work teams, based on a new and unique data set that combines data on errors occurring in the production process of a large car manufacturer with detailed information on the personal characteristics of workers related to the errors. We correct for non-random sample selection and the potential endogeneity of the age-composition in work teams. Our results suggest that productivity in this plant which is typical for large-scale manufacturing does not decline at least up to age 60.
    Keywords: Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity; Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination; Human Capital; Skills; Occupational Choice; Labor Productivity;
    JEL: J24 J14 D24
    Date: 2013
  10. By: Allison Atteberry; Susanna Loeb; James Wyckoff
    Abstract: Educational policymakers struggle to find ways to improve the quality of the teacher workforce. The early career period represents a unique opportunity to identify struggling teachers, examine the likelihood of future improvement, and make strategic pre-tenure investments in improvement as well as dismissals to increase teaching quality. To date, only a little is known about the dynamics of teacher performance in the first five years. This paper asks how much teachers vary in performance improvement during their first five years of teaching and to what extent initial job performance predicts later performance. We find that, on average, initial performance is quite predictive of future performance, far more so than typically measured teacher characteristics. Predictions are particularly powerful at the extremes. We employ these predictions to explore the likelihood of personnel actions that inappropriately distinguish performance when such predictions are mistaken as well as the much less discussed costs of failure to distinguish performance when meaningful differences exist. The results have important consequences for improving the quality of the teacher workforce.
    JEL: I21
    Date: 2013–06
  11. By: Serafinelli, Michel
    Abstract: I present direct evidence on the role of firm-to-firm labor mobility in enhancing the productivity of firms located near highly productive firms. Using matched employer-employee and balance sheet data for the Veneto region of Italy, I identify a set of high-wage firms (HWF) and show they are more productive than other firms. I then show that hiring a worker with HWF experience increases the productivity of other (non-HWF) firms. A simulation indicates that worker flows explain 10-15 percent of the productivity gains experienced by other firms when HWFs in the same industry are added to a local labor market.
    Keywords: productivity, agglomeration advantages, linked employer-employee data, labor mobility.
    JEL: J24 J31 J61 R2 R23
    Date: 2013–06–09
  12. By: Jeannette Brosig-Koch; Heike Hennig-Schmidt; Nadja Kairies; Daniel Wiesen
    Abstract: In recent health care reforms, several countries have replaced pure payment schemes for physicians (fee-for-service, capitation) by so-called mixed payment schemes. Until now it is still an unresolved issue whether patients are really better off after these reforms. In this study we compare the effects resulting from pure and mixed incentives for physicians under controlled laboratory conditions. Subjects in the role of physicians choose the quantity of medical services for different patient types. Real patients gain a monetary benefit from subjects’ decisions. Our results reveal that overprovision observed in fee-for-service schemes and underprovision observed in capitation schemes can, in fact, be reduced by mixed incentives. Interestingly, even the presentation of pure incentives as mixed incentives already significantly affects physicians’ behavior. Moreover, the mixed payment schemes generally provide a higher benefit-remuneration ratio than the respective pure payment schemes. Our findings provide some valuable insights for designing health care reforms.
    Keywords: Physician incentive schemes; fee-for-service; capitation; mixed payment; laboratory experiment; presentation effect; benefit-remuneration analysis
    JEL: C91 I11
    Date: 2013–05
  13. By: Dreber, Anna (Stockholm School of Economics); Rand, David (Harvard University and Yale University); Wernerfelt, Nils (MIT); Worrell, Peter (Bigelow Company, Portsmouth, NH); Zeckhauser, Richard (Harvard University)
    Abstract: This paper studies decision making by successful entrepreneurs and their agents. Since entrepreneurs decisions are often influenced by their agents' advice, understanding the behavior of both involved parties is crucial in analyzing observed decisions. To this end, a sample of successful American entrepreneurs and their agents made a high-stakes decision in a real-world context, albeit in an experimental setting offering experimental-scale payoffs. They were asked whether to accept a contract in what was essentially a trust game. A monetary gamble measured economic risk taking; and the difference between the two measured betrayal aversion. All entrepreneurs assumed the professional role as principal. All individuals playing agent were real world agents. We also have some agents play the role of the principal, and thus test whether subjects' roles affect the decisions they make. Consistent with most prior studies, our subjects proved both economically risk-averse and betrayal averse. Little difference in behavior emerged between entrepreneurs and agents in their respective professional capacities, or with agents acting as principals. These results imply that, under our realistically framed business scenario with aligned incentives, agents could be relied upon to be "faithful," to act according to their principals' proclivities. Importantly, however, they do not advise against what many expert observers believe to be principals' excess aversion to risks. That is, they fail to act as "correcting agents".
    Date: 2013–05
  14. By: Geschwind, Lars (Royal Institute of Technology); Broström, Anders (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper demonstrates that while ideals of close linkages between research and teaching are widely embraced in research-oriented universities, a practice of division of labour between teaching-oriented and research-oriented staff persists. In an investigation of how the research-teaching nexus is managed at three Swedish universities, we identify a perceived misalignment between institutional incentives for individual academic staff and the needs of teaching. Under pressure from such tensions, managers are forced to deploy pragmatic strategies for the staffing of undergraduate education tasks. This includes allowing research needs and agendas to take priority over teaching needs. While managers actively struggle to secure the participation of senior researchers in education, they often actively prefer to delegate the bulk of teaching activities to less research-active staff. Such strategies seem to reinforce existing patterns of division of labour among academic staff.
    Keywords: Teaching-research nexus; university management; research-oriented education
    JEL: I21 I23
    Date: 2013–06–10
  15. By: Stauvermann, Peter Josef; Kumar , Ronald
    Abstract: Using an over-lapping generations (OLG) model, we show how small open economies can enhance their growth through educational subsidies financed via government debt. In our model, we endogenize human capital and fertility without the strong assumptions of altruism or positive spill over effects from human capital accumulation. We show that subsidizing education through government debt leads to a Pareto improvement of all generations. Even if a country is a net borrower in the international capital market, we show that this subsidy-policy can help, under certain conditions, to improve its net borrowing position. Especially, our analysis can be applied to less developed countries, which are locked in a low development trap. A further desirable outcome of our analysis is that fertility rates decline for the small and less developed countries.
    Keywords: fertility; human capital; education subsidy; government debt.
    JEL: E60 H63 O41
    Date: 2013–04
  16. By: David K Levine; Salvatore Modica
    Date: 2013–06–03
  17. By: Suzanne Kok
    Abstract: Matches between workers and jobs are better in thick labour markets than in thin ones. This CPB Discussion Paper measures match quality by the gap between worker skills and their job tasks in the Netherlands. The smaller the gap, the better the match between skills and tasks. The measured gaps are 14 percent of a standard deviation smaller in cities than in the Dutch countryside. The location of work explains the observed higher quality of matches, while the location of residence does not. Robustness analyses show that these results are not explained by more efficient learning in cities or the spatial distribution of industrial and service occupations. Higher matching quality is associated with higher wages and explains part of the urban wage premia.
    JEL: J24 J23 R12 R23
    Date: 2013–06
  18. By: Gregory Kurtzon (U.S. Bureau of Labor Statistics)
    Abstract: It is shown that an economy where agents with one dimensional skill choose among occupations as intermediate complementary inputs with di¤erent learning costs has an equilibrium hierarchy from the lowest cost/skill/wage occupations to the highest which agents will cascade along away from the skill level of new entrants. This can explain why di¤erently/similarly skilled agents act like comple- ments/substitutes. The distinction between lifetime wages including the learning cost and current wages implies a more elastic e¤ect of immigration, but a more inelastic e¤ect of the minimum wage. These conclusions don?t rely on the typical assumptions of scale, preferences, or comparative advantage.
    Keywords: Occupation, Occupational Choice, Skill, Occupational Training, Occupational Wage Differential, Wage Distriubtion, Relative Wages, Labor Complementarity
    JEL: J24 J21 J31 I24
    Date: 2013–05
  19. By: Ferdi Botha
    Abstract: This paper explores various dynamics in the relationship between life satisfaction and education in South Africa using the 2008 National Income Dynamics Survey. The results indicate a strong positive association between educational attainment and individual satisfaction with life, which is true in the overall sample and for men and women. This positive relationship also holds for Black and Coloured individuals, but is insignificant in the Asian and White samples. Evidence indicates that education is a positional good, in that people who have attained more than the mean level of education in their relevant cluster are significantly more satisfied with life compared to those possessing less than the mean education.
    Keywords: subjective wellbeing, positional concerns, Education, South Africa
    JEL: I2 Z13
    Date: 2013
  20. By: Liliana D. Sousa
    Abstract: This study uses linked employer-household data to measure the impact of immigrant social networks, as identified via neighborhood and workplace affiliation, on immigrant earnings. Though ethnic enclaves can provide economic opportunities through job creation and job matching, they can also stifle the assimilation process by limiting interactions between enclave members and non-members. I find that higher residential and workplace ethnic clustering among immigrants is consistently correlated with lower earnings. For immigrants with a high school education or less, these correlations are primarily due to negative self-selection. On the other hand, self-selection fails to explain the lower earnings associated with higher ethnic clustering for immigrants with post-secondary schooling. The evidence suggests that co-ethnic clustering has no discernible effect on the earnings of immigrants with lower education, but may be leading to human capital traps for immigrants who have more than a high school education.
    Keywords: migration, ethnic enclaves, neighborhood effects, labor market assimilation
    JEL: J15 J24 J31 J61
    Date: 2013–06
  21. By: Tom Vogl
    Abstract: Discussions of cross-sectional fertility heterogeneity and its interaction with economic growth typically assume that the poor have more children than the rich. Micro-data from 48 developing countries suggest that this assumption was false until recently. Over the second half of the twentieth century, the association of economic status with fertility and the association of the number of siblings with their education flipped from generally positive to generally negative. Because large families switched from investing in more education to investing in less, heterogeneity in fertility across families initially increased but now largely decreases average educational attainment. While changes in GDP per capita, women's work, sectoral composition, urbanization, and population health do not explain the reversal, roughly half of it can be attributed to the rising aggregate education levels of the parent generation. The results are consistent with two classes of theories of the fertility transition: (1) those based on changing preferences over the quality and quantity of children and (2) those incorporating subsistence consumption constraints.
    JEL: E24 I25 J1 O1
    Date: 2013–06

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