nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2013‒12‒06
eighteen papers chosen by
Tommaso Reggiani
University of Cologne

  2. Dynamic Moral Hazard and Stopping By Robin Mason; Juuso Välimäki
  3. Old is Gold? The Effects of Employee Age on Innovation and the Moderating Effects of Employment Turnover By Schubert , Torben; Andersson , Martin
  4. After the Tournament: Outcomes and Effort Provision By McGee, Andrew; McGee, Peter
  5. Does Apprenticeship Improve Job Opportunities? A Regression Discontinuity Approach By Matteo PICCHIO; Stefano STAFFOLANI
  6. Subjective Evaluations: Discretionary Bonuses and Feedback Credibility By Fuchs, William
  7. How selective are real wage cuts? A micro-analysis using linked employer-employee data By Hirsch, Boris; Zwick, Thomas
  8. Factors Affecting Call Center as a Job Preference among Employees in Davao City By Castro, Alyssa Mae; Deluna, Roperto Jr
  9. Heterogeneity, Selection and Labor Market Disparities By Alessandra Bonfiglioli; Gino Gancia
  10. Does education or underlying human capital explain liberal economic attitudes? By John V.C. Nye; Sergiy Polyachenko
  11. Gender Gaps in Performance Pay: New Evidence from Spain By Sara de la Rica; Juan J. Dolado; Raquel Vegas
  12. The Cyclical Behaviour of Employers' Monopsony Power and Workers' Wages By Hirsch, Boris; Jahn, Elke J.; Schnabel, Claus
  13. Investing in the youngest: the optimal child care policy By Francesca Carta
  14. Non-standard Employment, Working Time Arrangements, Establishment Entry and Exit By Jochen Späth
  15. On-the-job search and optimal schooling under uncertainty and irreversibility By Anna Zaharieva
  16. The performance of mergers and acquisitions in emerging capital markets: new evidence By Svetlana Grigorieva; Tatiana Petrunina
  17. Experimental Evidence of the Effect of Monetary Incentives on Cross-Sectional and Longitudinal Response: Experiences from the Socio-Economic Panel (SOEP) By Mathis Schröder; Denise Sassenroth; John Körtner; Martin Kroh; Jürgen Schupp
  18. Optimal policy and the role of social contacts in a search model with heterogeneous workers By Yuliia Stupnytska

  1. By: Daniel H. Weinberg
    Abstract: Firms rely heavily on their investments in human capital to achieve profits. This research takes advantage of detailed information on worker performance and confidential information on firm revenue and operating costs to investigate the relationship between talent migration and firm profitability in major league sports. One key problem that firms have is identifying performance measures for its workforce, especially for potential employees (recruits). In contrast to nearly all other industries, in the industry of professional team sports, detailed information about the past performance of each individual worker (athlete) is known to all potential employers. First, I demonstrate using public data that worker (athlete) statistics aggregated to the establishment (team) level correlate with success on the field (measured in win percentage). Second, I use confidential data from the 2007 Economic Censuses, and from the 2007 and 2008 Service Annual Surveys to investigate the link between individual worker performance and team profitability, controlling for many other aspects of the sports business, specifically taking account of the mobility of athletic “stars” and “superstars” from one team to another. The investigations in this paper provide support for the hypothesis that hiring talented individuals (stars) will increase a firm’s profit. However, there is not convincing support for the incremental benefit of hiring superstars. The mixed evidence suggests a benefit on balance.
    Date: 2013–11
  2. By: Robin Mason (Department of Economics, University of Exeter and CEPR.); Juuso Välimäki (Aalto University School of Economics and HECER.)
    Abstract: We analyse a simple model of dynamic moral hazard in which there is a clear and tractable trade-off between static and dynamic incentives. In our model, a principal wants an agent to complete a project. The agent undertakes unobservable effort, which affects in each period the probability that the project is completed. We characterise the contracts that the principal sets, with and without commitment. We show that with full commitment, the contract involves the agent’s value and wage declining over time, in order to give the agent incentives to exert effort. The long-run levels of the value and wage depend on the relative discount rates of the principal and agent. We also characterise the set of sequentially rational equilibria, where the principal has no commitment power.
    Keywords: Principal-agent model, continuous time, moral hazard, project completion.
    JEL: C73 D82 J31
    Date: 2013
  3. By: Schubert , Torben (Fraunhofer Institute for Systems and Innovation Research (ISI) And CIRCLE, Lund University, Sweden); Andersson , Martin (CIRCLE, Lund University, Sweden and Blekinge Institute of Technology)
    Abstract: There is consistent evidence in the literature that average employee age is negatively related to firm-level innovativeness. This observation has been explained by older employees working with outdated technological knowledge and being characterized by reduced cognitive flexibility. We argue that firms can mitigate this effect through employee turnover. In particular turnover of R&D workers is deemed a vehicle for transfer of external knowledge to the firm, which can compensate for lower cognitive flexibility and up-to-date knowledge among older workers. We use a matched employer-employee dataset based on three consecutive CIS surveys for Sweden to test our predictions. Our results suggest a) that overall employee age impacts negatively on product innovation activities (both in terms of propensity and success), b) that the effect of em-ployee staying rate (measured by the share of employees that remain in the firm from one year to the next) on innovation follows an inverted U-shape implying an ‘optimal’ level of employment turnover, and c) that this ‘optimal’ value is lower for firms with older employees. The latter suggests that firms with older employees can at least partially compensate an aged workforce by increased employment turnover.
    Keywords: ageing; employee age; innovation; firm performance; R&D; human capita
    JEL: D22 J21 J24 L25
    Date: 2013–11–25
  4. By: McGee, Andrew (Simon Fraser University); McGee, Peter (National University of Singapore)
    Abstract: Modeling the incentive effects of competitions among employees for promotions or financial rewards, economists have largely ignored the effects of competition on effort provision once the competition is finished. In a laboratory experiment, we examine how competition outcomes affect the provision of post-competition effort. We find that subjects who lose arbitrarily decided competitions choose lower subsequent effort levels than subjects who lose competitions decided by their effort choices. We explore the preferences underlying this behavior and show that subjects' reactions are related to their preferences for meritocratic outcomes.
    Keywords: tournaments, counterproductive behavior, promotions, experiment
    JEL: C90 J30 D03
    Date: 2013–11
  5. By: Matteo PICCHIO (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali); Stefano STAFFOLANI (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali)
    Keywords: Apprenticeship, hazard function, permanent work, regression discontinuity, temporary work
    JEL: C36 C41 J24 J41
    Date: 2013–11
  6. By: Fuchs, William (University of California, Berkeley)
    Abstract: We provide a new rationale for the use of discretionary bonuses. In a setting with unknown match qualities between a worker and a firm and subjective evaluations by the principal, bonuses are useful in order to make the feedback from the firm to the workers credible. This way workers in good matches are less inclined to accept outside offers.
    Keywords: discretionary bonuses, feedback, signalling
    JEL: D82 D83 D86 M5
    Date: 2013–11
  7. By: Hirsch, Boris; Zwick, Thomas
    Abstract: Using linked employer-employee panel data for Germany, this paper investigates whether firms implement real wage reductions in a selective manner. In line with insider-outsider and several strands of efficiency wage theory, we find strong evidence for selective wage cuts with high-productivity workers being spared even when controlling for permanent differences in firms' wage policies. In contrast to some recent contributions stressing fairness considerations, we also find that wage cuts increase wage dispersion among peers rather than narrowing it. Notably, the same selectivity pattern shows up when restricting our analysis to firms covered by collective agreements or having a works council. --
    Keywords: real wage rigidity,real wage cuts,selectivity,Germany
    JEL: J30 J31
    Date: 2013
  8. By: Castro, Alyssa Mae; Deluna, Roperto Jr
    Abstract: This study was conducted to determine the factors that influence employees in Davao City to work in call centers. The objective of the study is to determine the socio-economic and demographic profile of employees working in the call center sector andidentify the factors that affect the job preferences among employees. Employees of the call center sector composed the population of this study and other occupations such as engineers, human resources personnel, and teachers were included for comparative purposes. Logistic regression was used to determine the factors affecting call center as a job preference using primary data. Results revealed that majority of call center agents were single and on the average age of 24 years old. Majority were college level at 51.3% and, only around 45% were college graduate. Result of the logit analysis showed that call center as a job preference is significantly affected by civil status, educational attainment, salary, job prospect, work hours, work environment, and geographical location.
    Keywords: Job Preferences, Call Center, Logit Model
    JEL: J2 J21 J22 J24 J28 J4 J48 J7
    Date: 2013–03–30
  9. By: Alessandra Bonfiglioli; Gino Gancia
    Abstract: We study the incentives to acquire skill in a model where heterogeneous firms and workers interact in a labor market characterized by matching frictions and costly screening. When effort in acquiring skill raises both the mean and the variance of the resulting ability distribution, multiple equilibria may arise. In the high-effort equilibrium, heterogeneity in ability is sufficiently large to induce firms to select the best workers, thereby confirming the belief that effort is important for finding good jobs. In the low-effort equilibrium, ability is not sufficiently dispersed to justify screening, thereby confirming the belief that effort is not so important. The model has implications for wage inequality, the distribution of firm characteristics, sorting patterns between firms and workers, and unemployment rates that can help explaining observed cross-country variation in socio-economic and labor market outcomes.
    Keywords: wage inequality, firm heterogeneity, unemployment, effort, beliefs, sorting, selection, multiple equilibria
    JEL: E24 J24 J64
    Date: 2013–10
  10. By: John V.C. Nye (George Mason University, Department of Economics. Professor); Sergiy Polyachenko (National Research University Higher School of Economics, Center for Institutional Studies. Junior Research Fellow)
    Abstract: There is a worldwide tendency for more educated people to trust in markets, private business, and trade, and to distrust government regulation and public provision relative to the less educated even in countries where people generally favor regulation (Aghion, et al. 2010). Individual survey data drawn from the Russian RMLS indicate that for Russia, as for most of the world, respondents with higher levels of education are more likely to trust private businesses and privatization, to distrust government regulation, and to favor lesser provision of services by the State (vs. the private sector). This matches the macro survey findings of Aghion et al. (2010) for the transition economies and the work of Caplan (2001, 2002, 2007). However, it is not clear whether education is a causal factor in these preferences or whether education is proxying for different levels of cognitive ability, health, or other forms of human capital. We use individual height data as instruments for formal education to remove the contemporaneous effects of schooling itself on the education-trust link. We find that this IV estimation leaves us with clear and persistent links between education and market friendly attitudes in Russia. This human capital effect is also quite independent of the role of age in determining liberal attitudes and is not simply a cohort effect. This seems to conform to the worldwide observation that – whatever the independent changing institutions – greater health and cognitive ability seem to promote market liberal beliefs in and of themselves. In contrast, socially liberal attitudes are not correlated with education in the IV regressions
    Keywords: Non-cognitive abilities, human capital, IV, trust, market liberal preferences, Russia
    JEL: I21
    Date: 2013
  11. By: Sara de la Rica; Juan J. Dolado; Raquel Vegas
    Abstract: This paper analyzes the gender gap in the performance–pay component of hourly wages received by workers in Spain using detailed information drawn from a large wage survey for 2006. Under the assumption that performance pay is determined in a more competitive fashion than the remaining wage components, there should be less room for gender discrimination. However, this is not what we find. After controlling for observable characteristics, non-random selection into performance-pay jobs and for segregation into different firms and occupations, the estimated adjusted gap in favour of male remains large (around 30 log points). Further, there is evidence of a “glass ceiling” pattern throughout the distribution of performance pay. After examining alternative hypotheses that could rationalize these findings, we conjecture that employers’ discrimination, possibly due to monopsonistic power, might be the one which is more consistent with the evidence.
    Date: 2013–11
  12. By: Hirsch, Boris (University of Erlangen-Nuremberg); Jahn, Elke J. (Institute for Employment Research (IAB), Nuremberg); Schnabel, Claus (University of Erlangen-Nuremberg)
    Abstract: This paper investigates the behaviour of employers' monopsony power and workers' wages over the business cycle. Using German administrative linked employer-employee data for the years 1985-2010 and an estimation framework based on duration models, we construct a time series of the firm-level labour supply elasticity and estimate its relationship to the aggregate unemployment rate. In line with theory, we find that firms possess more monopsony power during economic downturns, which shows to be robust to controlling for time-invariant unobserved worker heterogeneity. We also document that cyclical changes in workers' entry wages are of similar magnitude as those predicted under monopsonistic wage setting, suggesting that monopsony power should not be neglected when analysing wage cyclicality.
    Keywords: monopsony power, business cycle, entry wages
    JEL: J42 J31
    Date: 2013–11
  13. By: Francesca Carta (Toulouse School of Economics)
    Abstract: The aim of the paper is to characterize the optimal child care policies (subsidies and state provision), assuming that child care provision affects the child’s future abilities. Public intervention is needed since two sources of economic inefficiency are contemporaneously influential: parents do not properly account for the impact of child care on future generations (human capital externalities) and income tax is distortive, hence labour supply is suboptimal. In an optimal income tax model, altruistic parents provide child care either by providing care at home or by paying for it on the market. If the government is able to observe the amount of domestic care provided by parents, it is optimal to subsidize provision of paid child care if only to correct the human capital externality. If, conversely, it is not possible to observe the amount of domestic care, market-provided child care is subsidized, including for redistributive reasons. In fact, an efficiency case for higher child care subsidies to lower income earners arises. State provision of child care may be desirable when market care purchases cannot be observed at the household level.
    Keywords: optimal taxation; household production; child care; intergenerational transfers; warm-glow altruism
    JEL: H21 H23 H53 J13 J22 J24
    Date: 2013–06
  14. By: Jochen Späth
    Abstract: This paper addresses the issue if and to what extent young firms differ from incumbents regarding the use of non-standard employment, trust-based working time arrangements and overtime hours in the light of the qualitative changes of employment structures that are taking place in industrialized countries, such as rising shares of non-standard employment and borders between work and private life that become increasingly blurred. Based on a microeconometric analysis of the IAB Establishment Panel, a representative survey of about 16,000 employers in Germany, we find that young establishments rely significantly more often on limited contracts and freelance work than incumbent businesses in order to hedge the higher risks and uncertainties of young firms. Likewise, trust-based working time arrangements and overtime hours are more an issue in young than in incumbent firms, indicating a higher level of subjectivated work in young firms. Additionally, we provide basic evidence that these differences are not purely transitory but on the contrary rather stable as the firms grow older, which makes young firms contribute a substantial part to the ongoing qualitative changes of employment structures.
    Keywords: start-ups, trust-based working hours, overtime, team work, job quality, non-standard employment
    JEL: L26 J23 D22
    Date: 2013–11
  15. By: Anna Zaharieva (Center for Mathematical Economics, Bielefeld University)
    Abstract: This paper develops a labour market model with on-the-job search, match-specific productivity draws and an endogenous irreversible schooling decision. The choice of schooling is modelled as an optimal stopping problem which gives rise to the equilibrium heterogeneity of workers with respect to the formal education. The optimal schooling decision is characterized by the reservation productivity of students which is a monotonic function of time. Moreover, this reservation productivity is lower in expansions when job-to-job mobility is more intensive. Therefore, the model is compatible with the empirical evidence that expansions have a positive effect on the probability of a school dropout. The schooling density is downward-sloping and the equilibrium wage distribution is right-skewed with a unique interior mode. This means that the majority of workers earn wages in the middle range of the earnings distribution. At the same time there is a small proportion of employees in the beginning of their career with wages in the left tail of the earnings distribution and a small proportion of high-skilled workers earning wages in the right tail of the distribution.
    Keywords: Optimal schooling, uncertainty, on-the-job search, wage dispersion
    JEL: I21 I24 J62 J64
    Date: 2013–11
  16. By: Svetlana Grigorieva (Svetlana Grigorieva, researcher, Corporate Finance Center, assistant professor, Department of Finance at National Research University Higher School of Economics, Moscow); Tatiana Petrunina (Tatiana Petrunina, junior researcher, Corporate Finance Center, National Research University Higher School of Economics, Moscow, Russia)
    Abstract: Researchers have long tried to define the impact of corporate mergers and acquisitions on company performance. We contribute to the existing literature by examining the influence of M&A deals on company value in the short-run using the event study method and in the long-run based on economic profit concept. Examining a sample of 80 deals initiated by companies from emerging capital markets over 2002-2009, we find that M&As are value-destroying deals for the combined firms. Results from the long-run analysis prove the negative industry-adjusted differences between post-acquisition and pre-acquisition performance measures. The difference is equal to a significant -3.3% for the EBITDA/Sales ratio. The Economic Profit approach demonstrates a similar result. Our findings from the short-run analysis indicate that the announcements of M&A deals generate significant high returns for target shareholders, while the returns to bidder shareholders are not significant. We also analyze the determinants of M&A performance, such as method of payment, business similarity, and the target’s country.
    Keywords: Mergers and Acquisitions, Value Creation, Economic Profit, Company Performance
    JEL: G34
    Date: 2013
  17. By: Mathis Schröder; Denise Sassenroth; John Körtner; Martin Kroh; Jürgen Schupp
    Abstract: The paper gives an overview of two experiments implemented in the German Socio-Economic Panel (SOEP) considering the effect of monetary incentives on cross-sectional and longitudinal response propensities. We conclude that the overall effects of monetary incentives on response rates are positive compared to the "classic" SOEP setting, where a charity lottery ticket is offered as an incentive. In the cross-section, cash incentives are associated with a higher response rate as well as a lower rate of partial unit non-response (PUNR) and fewer noncontacts on the household level. Separate analyses for German and immigrant households show that a monetary incentive has a positive effect on immigrant households’ participation in subsequent waves. Regarding the regions where the households are located, the high cash incentive has a positive effect on response rates in provincial towns and rural areas. The incentive treatment decreases the likelihood of PUNR in the longitudinal setting by motivating members of participating households who had refused to participate in previous waves to respond in subsequent waves.
    Keywords: Incentive experiment, response rates, partial unit nonresponse, nonresponse bias, conditional incentives
    Date: 2013
  18. By: Yuliia Stupnytska (Center for Mathematical Economics, Bielefeld University; Center for Mathematical Economics, Bielefeld University)
    Abstract: This paper develops a search model with heterogeneous workers and social networks. High ability workers are more productive and have a larger number of professional contacts. Firms have a choice between a high cost vacancy in the regular labour market and a low cost job opening in the referral market. In this setting the model predicts that a larger number of social contacts is associated with a larger wage gap between high and low ability workers and a larger difference in the equilibrium unemployment rates. Next we demonstrate that the decentralized equilibrium is inefficient for any value of the bargaining power. There are two reasons for the inefficiency. First, the private gain from creating a job in the referral market is always below the social gain, so the equilibrium unemployment of high ability workers is above its optimal value. Moreover, high ability workers congest the market for low ability workers, so the equilibrium wage inequality is inefficiently large. This is in contrast to the result of Blazquez and Jansen (2008) showing that the distribution of wages is compressed in a search model with heterogeneous workers. Finally, we show that a combination of taxes and subsidies can restore the optimal allocation.
    Keywords: social capital, social networks, referrals, wage dispersion, wage compression
    JEL: J23 J31 J38 J64
    Date: 2013–09

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