nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2013‒06‒30
twenty papers chosen by
Tommaso Reggiani
University of Cologne

  1. Who to pay for performance? The choice of organisational level for hospital performance incentives By Kristensen, Soren Rud; Bech, Mickael; Lauridsen, Jørgen T
  2. Higher education experiences and new venture performance By Broström, Anders; Baltzopoulos, Apostolos
  3. Human capital and development By V N Balasubramanyam; A Balasubramanyam
  5. Organizations, Diffused Pivotality and Immoral Outcomes By Falk, Armin; Szech, Nora
  6. Differences in Initial Training and Wages of Japanese Engineering and Retailing Companies - Who Pays for Higher Training Costs? By Uschi Backes-Gellner; Shiho Futagami; Silvia Teuber; Andrea Willi
  7. Human capital, social mobility and the skill premium By Konstantinos Angelopoulos; James Malley; Apostolis Philippopoulos
  8. Fair Wages Survive Multiple Sources of Income Inequality By Karina Gose
  9. Worker flows and establishment wage differentials : a breakdown of the relationship By Richard Duhautois; Fabrice Gilles; Héloïse Petit
  10. Human capital investment by the poor: Informing policy with laboratory experiments By Eckel, Catherine; Johnson, Cathleen; Montmarquette, Claude
  11. The Role of Incentives in Co-operation Failures By David Bartolini
  12. Leading-effect vs. Risk-taking in Dynamic Tournaments: Evidence from a Real-life Randomized Experiment By Mueller-Langer, Frank; Andreoli-Versbach, Patrick
  13. How to deal with unprofitable customers? A salesforce compensation perspective By Sumitro Banerjee; Alex P. Thevaranjan
  14. Does It Pay to Volunteer? The Relationship Between Volunteer Work and Paid Work By Helene Jorgensen
  15. The Economics of Severance Pay By Boeri, Tito; Garibaldi, Pietro; Moen, Espen R.
  16. Who Chooses Which Private Education? Theory and International Evidence By Bertola, Giuseppe; Checchi, Daniele
  17. Nain's Hierarchy of Needs: An Alternative to Maslow's & ERG's Hierarchy of Needs By nain, bhavya
  18. Gender differences in preferences for health-related absences from work By Avdic, Daniel; Johansson, Per
  19. The Price of Warm Glow By Lilley, Andrew; Slonim, Robert
  20. Using Performance Measures to Promote Evidence-Based Care: A Bayesian Approach. By Timothy F. Christian; Thomas W. Croghan; Myles Maxfield

  1. By: Kristensen, Soren Rud (Centre of Health Economics); Bech, Mickael (COHERE, Department of Budiness and Economics); Lauridsen, Jørgen T (COHERE, Department of Business and Economics)
    Abstract: When implementing a pay for performance (P4P) scheme, designers must decide to whom the nancial incentive for performance should be directed. This paper compares department level hospital reported performance on the Danish Case Management Scheme at hospitals that did and did not redistribute performance payments to the department level. Across a range of models we nd that hospital reported performance at departments that operate under a direct nancial incentive is about 5 percentage points higher than performance at departments at hospital where performance payments are not directly redistributed to the department level. This result is in line with the theoretical expectations but due to the non-experimental design of the study, our results only have a causal interpretation under certain assumptions discussed in the paper
    Keywords: Pay for performance; P4P; Hospital incentives; Incentive design; Team production
    JEL: L23 M52 O18
    Date: 2013–06–15
  2. By: Broström, Anders (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Baltzopoulos, Apostolos (Swedish Competition Authority)
    Abstract: Human capital theory suggests that higher education, as a means of capability creation and of ability screening, is positively associated with individuals’ success as entrepreneurs. This paper argues that social capital perspectives, in particular the theory of local embeddedness and team formation theory, complement human capital theory in explaining the relationship between higher education attainment and entrepreneurial success. However, human and social capital perspectives apply to different domains. While the former is appropriate for knowledge-based entrepreneurship, the latter is primarily valid in contexts where specialized analytical knowledge plays a less accentuated role. These propositions are supported by an investigation of survival and growth of entrepreneurial ventures in Sweden.
    Keywords: Higher education; entrepreneurship; universities; entrepreneurial performance
    JEL: I23 L26 O18 R30
    Date: 2013–06–20
  3. By: V N Balasubramanyam; A Balasubramanyam
    Date: 2013
  4. By: Dhillon, Amrita (Department of Economics, University of Warwik); Iversen, Vegard (Department of Economics, University of Manchester); Torsvik, Gaute (Department of Economics, University of Bergen)
    Abstract: We study an important mechanism underlying employee referrals into informal low skilled jobs in developing countries. Employers can exploit social preferences between employee referees and potential workers to improve discipline. The profitability of using referrals increases with referee stakes in the firm, and, in most cases, with the strength of the social tie between the referee and the new recruit. We provide an empirical counterpart to these results using primary data covering low- and unskilled migrants in India. Consistent with the theoretical predictions, we find a high prevalence of workplace referral and strong kinship ties between referees and new recruits. Finally, workplace intermediaries are different from and typically in more ‘prestigious’ jobs than those recruited.
    Keywords: networks; low- and unskilled jobs; India; moral hazard; employee referrals; efficiency wages; referee incentives; strength of ties
    JEL: D82 D86 J31 J41 O12 O17
    Date: 2013–06–12
  5. By: Falk, Armin (University of Bonn); Szech, Nora (University of Bamberg)
    Abstract: This paper studies how organizational design affects moral outcomes. Subjects face the decision to either kill mice for money or to save mice. We compare a Baseline treatment where subjects are fully pivotal to a Diffused-Pivotality treatment where subjects simultaneously choose in groups of eight. In the latter condition eight mice are killed if at least one subject opts for killing. The fraction of subjects deciding to kill is higher when pivotality is diffused. The likelihood of killing is monotone in subjective perceptions of pivotality. On an aggregate level many more mice are killed in Diffused-Pivotality than Baseline.
    Keywords: morality, pivotality, experiment, organization, responsibility
    JEL: C91 D01 D03 D23 D63
    Date: 2013–06
  6. By: Uschi Backes-Gellner (Department of Business Administration, University of Zurich); Shiho Futagami (Yokohama National University); Silvia Teuber (Department of Business Administration, University of Zurich); Andrea Willi (Department of Business Administration, University of Zurich)
    Abstract: The optimal human resource and skill development strategy is one important factor of economic success. This paper, therefore, analyzes industry-specific differences in the training provision between engineering and retailing companies in Japan and focuses in particular on the initial training provision for intermediate skills at the firm level. Based on 11 in-depth interviews in the retailing and the engineering sector in Japan, we find that gross training costs per basic trainee are significantly higher in engineering than in retailing. However, not only the engineering companies, but also their employees bear higher costs than their counterparts in retailing. The absolute and relative entrance wages for production employees are significantly lower than the entrance wages of employees in sale. Even though wages in engineering increase significantly stronger within the first five years, the absolute and relative wages in engineering remain still significantly lower. The results relate to the qualification levels of new trainees and the career paths.
    Keywords: Training in Japan, Intermediate skills, Engineering and Retailing, Wages
    JEL: M53 J24 L64 L81
    Date: 2013–06
  7. By: Konstantinos Angelopoulos; James Malley; Apostolis Philippopoulos
    Abstract: This paper considers the role of human capital accumulation of agents differentiated by skill type in the joint determination of social mobility and the skill premium. Our approach allows us to evaluate the dynamic e¤ects of tax reforms and education spending policies on economic e¢ ciency as well as on social and wage inequality. The analysis contributes to the literature by showing that endogenous so- cial mobility, human capital for skilled and unskilled labour, and exter- nalities from skilled human capital on social mobility are key channels through which tax-spending policy is transmitted.
    Keywords: social mobility, skill premium, tax and education policy
    JEL: E62 J31 J62
    Date: 2013–06
  8. By: Karina Gose (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: When an employee in a gift exchange game earns significantly less than the employer, the source of employer income does not affect effort choices. However, to induce one unit of effort, the employer has to pay higher wages than in a game without payoff inequality.
    Keywords: Gift exchange, fair wage-effort hypothesis, reciprocity, inequity aversion, tit for tat
    JEL: C91 D31 M52
    Date: 2013–06
  9. By: Richard Duhautois (CEE - Centre d'études de l'emploi - Ministère de l'Enseignement supérieur et Recherche - Ministère du Travail, de l'Emploi et de la Santé, ERUDITE - Equipe de Recherche sur l'Utilisation des Données Individuelles Temporelles en Economie - Université Paris-Est Créteil Val-de-Marne (UPEC) : EA437 - Université Paris-Est Marne-la-Vallée (UPEMLV)); Fabrice Gilles (CEE - Centre d'études de l'emploi - Ministère de l'Enseignement supérieur et Recherche - Ministère du Travail, de l'Emploi et de la Santé, EQUIPPE - ECONOMIE QUANTITATIVE, INTEGRATION, POLITIQUES PUBLIQUES ET ECONOMETRIE - Université Lille I - Sciences et technologies); Héloïse Petit (CEE - Centre d'études de l'emploi - Ministère de l'Enseignement supérieur et Recherche - Ministère du Travail, de l'Emploi et de la Santé, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: We address the relation between establishment wage differentials and worker flows, i.e., the churning rate and the quit rate. Our analysis is based on a linked employer-employee dataset covering the French private sector from 2002 to 2005. Our estimations support the hypothesis that wage premium is an efficient human resource management tool to stabilize workers: churning rates are lower in high-paying firms due to lower quit rates. We further show that the relation is not linear, and it differs among skill groups and according to establishment size: it is strongest for low-wage levels, for low-skilled workers and in large establishments.
    Keywords: establishment wage effects; worker flows; spline regression; linked employer-employee data
    Date: 2012–11–15
  10. By: Eckel, Catherine; Johnson, Cathleen; Montmarquette, Claude
    Abstract: The purpose of the study is to better understand human capital investment decisions of the working poor, and to collect information that can be used to design a policy to induce the poor to invest in human capital. We use laboratory experimental methodology to elicit the preferences and observe the choices of the target population of a proposed government policy. We recruited 256 subjects in Montreal, Canada; 72 percent had income below 120 percent of the Canadian poverty level. The combination of survey measures and actual decisions allows us to better understand individual heterogeneity in responses to different subsidy levels. In particular, participants chose between various cash alternatives and educational subsidies, for themselves and for a family member, allowing for the construction of two measures of willingness to invest in education. Two behavioral characteristics, patience and attitude towards risk, are key to understanding the determinants of educational investment for the low-income individuals in this experiment. The decision to save for a family member’s education is somewhat different from that of investing in one’s own education. Patient participants were more likely to save for a family member’s education, but in contrast to investing in one’s own education, a subject’s attitude towards risk played no role.
    Keywords: Intertemporal choice, field experiments, risk attitudes, working poor.
    JEL: C93 D81 D91
    Date: 2012–10
  11. By: David Bartolini
    Abstract: There are many situations where the best outcome is reached through co-operation and co-ordination of agents’ actions. Although this is the best collective outcome, economic agents may fail to implement such co-operative strategy. The reason for this failure may be lack of information about the gains from co-operation, or lack of capacity to implement the co-operative strategy. The present work focuses on two obstacles to co-operation that are linked with the incentives of the economic agents, and that are present even when the problems of information and capacity are taken care off. The two obstacles are the incentive to free ride and the strategic risk. The former stems from the possibility of obtaining gains without paying the associated costs (which are incurred by the agents that decide to co-operate); the latter is the risk of being the only one (or among the few) that acts co-operatively, so that the agent pays the costs but obtains less than what it would be feasible had other agents decided to co-operate. In this setting, using a game theoretical approach, we distinguish several cases of co-operation failures according to the relevance of those two obstacles. The analysis is then applied to contractual design and financial incentives. The overall message is the importance of identifying the source of co-operation failure in order to devise an effective policy to induce co-operation. It may not be enough to tell people (and institutions) that they should co-operate because it is in their interest, it is necessary to identify the incentives that shape agents’ decisions and are responsible for co-operation failures.
    Keywords: game theory, co-operation and co-ordination failure, economic incentives
    JEL: C70 C72 D86
    Date: 2013–05–27
  12. By: Mueller-Langer, Frank; Andreoli-Versbach, Patrick
    Abstract: Two 'order effects' may emerge in dynamic tournaments with information feedback. First, participants adjust effort across stages, which could advantage the leading participant who faces a larger 'effective prize' after an initial victory (leading-effect). Second, participants lagging behind may increase risk at the final stage as they have 'nothing to lose' (risk-taking). We use a randomized natural experiment in professional two-game soccer tournaments where the treatment (order of a stage-specific advantage) and team characteristics, e.g. ability, are independent. We develop an identification strategy to test for leading-effects controlling for risk-taking. We find no evidence of leading-effects and negligible risk-taking effects.
    Keywords: Tournaments; order effects; leading-effect; risk-taking; randomized natural experiments
    JEL: C93 C21 D01 L83
    Date: 2013–06–17
  13. By: Sumitro Banerjee (ESMT European School of Management and Technology); Alex P. Thevaranjan (Whitman School of Management, Syracuse University)
    Abstract: We show that prices and incentives recommended by the salesforce literature when targeting a profitable segment can attract unprofitable customers, particularly when salespeople have high productivity and low risk (i.e., risk aversion times uncertainty). Therefore, when customers are unidentifiable, unprofitable customers may also enter the market creating an adverse selection problem for the salespeople. By solving the moral hazard and adverse selection problems simultaneously, we show that firms can prevent the entry of unprofitable customers by “screening”. Although, screening generally requires a higher price to dissuade unprofitable customers, when firms hire salespeople, however, it requires lowering of both selling effort and the price. It also leads to a “sales trap” restricting the sales to the profitable segment to a fixed level. Screening, therefore, lowers firm profits obtained from the profitable customers. When salespeople are highly productive and risk tolerant, this drop in profit can be so high that “accommodating” unprofitable customers becomes the preferred strategy. Furthermore, the adverse selection problem intensifies and accommodation becomes more preferable when there is no moral hazard between firm and the salesperson. Behavior of unprofitable customers, therefore, must be an important consideration when targeting high-value customers and designing salesforce compensation.
    Keywords: Salesforce compensation, target markets, adverse selection, screening, pooling, principal-agent models, agency theory
    Date: 2013–06–07
  14. By: Helene Jorgensen
    Abstract: It is widely believed that volunteering will improve workers’ job prospects. The logic is that volunteering offers opportunities to expand work-related experience, develop new skills, and build a network of professional contacts. For young people with little history of paid employment it can also signal that a person would be a reliable and motivated employee. In spite of these widespread views about volunteering, surprisingly little research has been done on the effect of volunteering on employment and pay in the United States. This analysis examines volunteering as a pathway to employment during a period of high unemployment, when it is reasonable to expect the beneficial effects of volunteering to be especially pronounced.
    Keywords: volunteering, jobs, employment, unemployment, economy, volunteer, job prospects
    JEL: J J6 J2 J64 J2
    Date: 2013–06
  15. By: Boeri, Tito (Bocconi University); Garibaldi, Pietro (University of Turin); Moen, Espen R. (Norwegian Business School (BI))
    Abstract: All OECD countries have either legally mandated severance pay or compensations imposed by industry-level bargaining in case of employer initiated job separations. According to the extensive literature on Employment Protection Legislation such transfers are either ineffective or highly distortionary. In this paper we show that mandatory severance is optimal in presence of wage deferrals when there is moral hazard of employers and workers, notably when employers cannot commit not to fire a non-shirker and shirkers can also get away with it. Our model also accounts for two neglected features of EPL. The first is that dismissal costs depend not only on whether the dismissal is deemed fair or unfair, but also on the nature, economic vs. disciplinary, of the layoff. The second feature is that compensation for unfair dismissal or severance is generally increasing with tenure.
    Keywords: severance, unfair dismissal, graded security
    JEL: J63 J65 J33
    Date: 2013–06
  16. By: Bertola, Giuseppe (EDHEC Business School); Checchi, Daniele (University of Milan)
    Abstract: Private school students do not always perform better in standardized tests. We suggest that this may be explained by choice of private schooling by less capable students in countries where government schools are better suited to talented students. To assess the empirical relevance of this mechanism, we exploit cross-country variation in the PISA 2009 survey of differences between private and state school regarding organizational features that are differently suitable for students with different learning ability. We seek and find evidence of this mechanism's empirical relevance in controlled regressions that treat within-country variation of PISA scores as an indicator of unobserved ability to learn.
    Keywords: talent, private education, PISA survey, educational background
    JEL: I21 I24
    Date: 2013–06
  17. By: nain, bhavya
    Abstract: This article gives reasons as to why Maslow's & ERG Theory of Needs is inaccurate. It also gives reasons why the same is inaccurate in an organizational perspective. The author also gives a alternative model of needs, namely the Nain Model, which is particularly applicable in an organizational perspective. This article has been written for those interested in Organizational Behaviour.
    Keywords: Maslow, Need, Hierarchy, organizational behaviour,employees,motivation
    JEL: D23 D29
    Date: 2013–06–16
  18. By: Avdic, Daniel (IFAU - Institute for Evaluation of Labour Market and Education Policy); Johansson, Per (IFAU - Institute for Evaluation of Labour Market and Education Policy)
    Abstract: Women are on average more absent from work for health reasons than men. At the same time, they live longer. This conflicting pattern suggests that part of the gender difference in health-related absenteeism arises from differences between the genders unrelated to actual health. An overlooked explanation could be that men an women's preferences for absenteeism differ, for example because of gender differences in risk preferences. These differences may originate from the utility-maximizing of households in which women's traditional dual roles influence household decisions to invest primarily in women's health. Using detailed administrative data on sick leave, hospital visits and objective health measures we first investigate the existence of gender-specific preferences for abstenteeism and subsequently test for the household investment hypothesis. We find evidence for the existence of gender differences in preferences for absence from work, and that a non-trivial part of these preference differences can be attributed to household investments in women's health.
    Keywords: Sickness absence; gender norms; health investments
    JEL: D13 J22
    Date: 2013–05–28
  19. By: Lilley, Andrew (University of Sydney); Slonim, Robert (University of Sydney)
    Abstract: This paper presents a model and experimental evidence to explain the "volunteering puzzle" where agents prefer volunteering time to donating money when monetary donations are, ceteris paribus, more efficient for providing resources to charity. In the model agents receive heterogeneous utility from pure and impure altruism (Andreoni 1989) that permits warm glow to vary between monetary donations and volunteering, thus allowing preferences for impure altruism to rationalize inefficient allocation decisions. We define a measure of the price of impure altruism as the additional proportion of income sacrificed by a donor to give in the dimension that maximizes her utility, holding the overall charitable contribution constant. To test the predictions of the model we ran an experiment in which we varied within-subjects the costs and benefits of monetary and volunteer donations. We also primed between-subjects the emphasis on the donation value to the charity (pure altruism) or the sacrifice to the donor (impure warm-glow altruism). Consistent with the model's predictions, the experiment shows that priming pure altruism increases the efficiency of donation choices, substitutability of donations between money and time and crowding out. Nonetheless, while greater impurity results in a more inefficient allocation of resources, empirically we find it increases overall charitable donations. We discuss the implications of our experimental results for both theory and policy.
    Keywords: altruism, warm glow, volunteering, monetary donations, laboratory experiments
    JEL: D64 D78 H41 C91
    Date: 2013–06
  20. By: Timothy F. Christian; Thomas W. Croghan; Myles Maxfield
    Keywords: Performance Measures, Evidence-Based Care, Bayesian Approach, Health Care Effectiveness
    JEL: I
    Date: 2013–06–30

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.