nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2014‒01‒24
fifteen papers chosen by
Tommaso Reggiani
University of Cologne

  1. Hierarchical Organization and Performance Inequality: Evidence from Professional Cycling By Bertrand Candelon; Arnaud Dupuy
  2. Equality under Threat by the Talented: Evidence from Worker-Managed Firms By Burdín, Gabriel
  3. Teams and Tournaments in Relational Contracts By Kvaløy, Ola; Olsen, Trond E.
  4. Money talks: Paying physicians for performance By Keser, Claudia; Schnitzler, Cornelius
  5. Are Female Top Managers Really Paid Less? By Geiler, P.H.M.; Renneboog, L.D.R.
  6. Incentives, Selection and Productivity in Labor Markets: Evidence from Rural Malawi By Raymond P. Guiteras; B. Kelsey Jack
  7. Profit Sharing and Workplace Productivity: Does Teamwork Play a Role? By Long, Richard J.; Fang, Tony
  8. Optimal Incentives in a Principal-Agent Model with Endogenous Technology By Marco A. Marini; Paolo Polidori; Desiree Teobaldelli; Davide Ticchi
  9. CEO Monitoring and board effectiveness - Resolving CEO compensation issue By Chiraz Ben Ali; Frederic Teulon
  10. Local Employer Competition and Training of Workers By Sylvi Rzepka; Marcus Tamm
  11. Powerful Independent Directors By Kathy Fogel; Liping Ma; Randall Morck
  12. Sibling Influence on the Human Capital of the Left Behind By Biavaschi, Costanza; Giulietti, Corrado; Zimmermann, Klaus F.
  13. Women on French Corporate Board of Directors- How Do They Differ from their Male Counterparts? By Rey Dang; Anne-Françoise Bender; Marie-José Scotto
  14. Voluntary work and wages By Bruno, Bruna; Fiorillo, Damiano
  15. Returns to Skills around the World: Evidence from PIAAC By Hanushek, Eric A.; Schwerdt, Guido; Wiederhold, Simon; Woessmann, Ludger

  1. By: Bertrand Candelon; Arnaud Dupuy
    Abstract: This paper proposes an equilibrium theory of the organization of work in an economy with an implicit market for productive time. In this market, agents buy or sell productive time. This implicit market gives rise to the formation of teams, organized in hierarchies with one leader (buyer) at the top and helpers (sellers) below. Relative to autarky, hierarchical organization leads to higher within and between team payo¤s/productivity inequality. This prediction is tested empir ically in the context of professional road cycling. We show that the observed rise in performance inequality in the peloton since the 1970s is merely due to a rise in help intensity within team and consistent with a change in the hierarchical organization of teams.
    Keywords: Hierarchical organization, productive time, helping time, inequality, professional cycling.
    JEL: D2 D3 L22
    Date: 2014–01–06
  2. By: Burdín, Gabriel (IECON, Universidad de la República)
    Abstract: Are high-ability individuals more likely to quit egalitarian regimes? Does the threat of exit by talented individuals restrict the redistributive capacity of democratic organizations? This paper revisits that long-standing debate by analyzing the interplay between compensation structure and quit behavior in the distinct yet underexplored institutional setting of worker-managed firms. The study exploits two novel administrative data sources: a panel of Uruguayan workers employed in both worker-managed and conventional firms; and a linked employer–employee panel data set covering the population of Uruguayan worker-managed firms and their workers from January 1997 to April 2010. A key advantage of the data is that it enables one to exploit within-firm variation on wages to construct an ordinal measure of the worker ability type. The paper's four main findings are that (1) worker-managed firms redistribute in favor of low-wage workers; (2) in worker-managed firms, high-ability members are more likely than other members to exit; (3) the hazard ratio of high-ability members is lower for founding members and for those employed by worker-managed firms in which there is less pay compression; and (4) high-ability members are less likely to quit when labor market conditions in the capitalist sector are less attractive. This paper contributes to the study of the interplay between equality and incentives that permeates many debates in public finance, comparative economic systems, personnel and organizational economics.
    Keywords: labor managed firms, redistribution, compensation structure, job mobility
    JEL: H00 J54 J62 M52 P0
    Date: 2013–12
  3. By: Kvaløy, Ola (UiS Business School, University of Stavanger); Olsen, Trond E. (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: This paper analyses and compares optimal relational contracts between a principal/firm and a set of agents when (a) only aggregate output can be observed, and (b) individual outputs can be observed. We show that the optimal contract under (a) is a team incentive scheme where each agent is paid a maximal bonus for aggregate output above a threshold and a minimal (no) bonus otherwise. The team’s efficiency decreases with its size (number of agents) when outputs are non-negatively correlated, but may increase considerably with size if outputs are negatively correlated. In the case where individual output can be observed, we show that the optimal contract is a tournament scheme where the conditions for an agent to obtain the (single) bonus are stricter for negatively compared to positively correlated outputs. We finally show that if agents have bargaining power, firms may deliberately choose to organize production as a team where only aggregate output is observable. The team alternative is more likely to be superior under negatively correlated outputs.
    Keywords: Relational Contracts; team incentive scheme; tournament
    JEL: D00 D20 D21 D80 D86
    Date: 2013–12–30
  4. By: Keser, Claudia; Schnitzler, Cornelius
    Abstract: Pay-for-performance has been enjoying a growing popularity among healthcare policy makers. It attempts to tie physician payment to quality of care. In a controlled laboratory experiment, we investigate the effect of pay-for-performance on physician provision behavior and patient benefit. For that purpose, we compare two payment systems, a traditional fee-for-service payment system and a hybrid payment system that blends fee-for-service and pay-for-performance incentives. Physicians are found to respond to pay-for-performance incentives. Approximately 89 percent of the participants qualify for a pay-for-performance bonus payment in the experiment. The physicians' relative share of optimal treatment decisions is significantly larger under the hybrid payment system than under fee-for-service. A patient treated under the hybrid payment system is significantly more likely to receive optimal treatment than a fee-for-service patient of matching type and illness. Pay-for-performance in many cases alleviates over- and under-provision behavior relative to fee-for-service. We observe unethical treatment behavior (i.e., the provision of medical services with no benefit to the patient), irrespective of the payment system. --
    Keywords: experimental economics,physician remuneration,pay-for-performance (P4P)
    Date: 2013
  5. By: Geiler, P.H.M.; Renneboog, L.D.R. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: Are female top managers paid less than their male counterparts? Is the gender gap higher in male-dominated industries? What effect on pay do female non-executive directors and remuneration consultants exert? While we find no pay gap for the figure-head (CEO), there is strong pay discrimination at the level of the other top managers. These female executive directors earn over a five-year tenure period £1.3 million less than male directors, and this pay gap is visible for all components of pay. The pay gap is lower for executives in firms with one or more female non-executives. Female executives in ‘male’ industries receive less remuneration than male executives but the gender pay gap is smaller. The advice of top remuneration consultants does not reduce the pay gap.
    Keywords: executive compensation;gender pay gap;gender discrimination;pay-for-performance;glass ceiling;glass cliff
    JEL: J31 J33 M52 G30
    Date: 2014
  6. By: Raymond P. Guiteras; B. Kelsey Jack
    Abstract: An observed positive relationship between compensation and productivity cannot distinguish between two channels: (1) an incentive effect and (2) worker selection. We use a simplified Becker-DeGroot-Marschak mechanism, which provides random variation in piece rates conditional on revealed reservation rates, to separately identify the two channels in the context of casual labor markets in rural Malawi. A higher piece rate increases output in our setting, but does not attract more productive workers. Among men, the average worker recruited at higher piece rates is actually less productive. Local labor market imperfections appear to undermine the worker sorting observed in well-functioning labor markets.
    JEL: C93 J22 J24 J33 O12
    Date: 2014–01
  7. By: Long, Richard J. (University of Saskatchewan); Fang, Tony (Monash University)
    Abstract: The conditions under which profit sharing affects workplace productivity have never been fully understood. Using panel data, this paper examines whether there is any link between adoption of an employee profit sharing plan and subsequent productivity growth in Canadian establishments, and whether this relationship is affected by various contextual factors, particularly use of work teams. In so doing, we use both three and five-year panels. Overall, we find a significant link between adoption of a profit sharing program and subsequent productivity growth in both panels, but only among establishments that utilize employee work teams.
    Keywords: profit sharing plans, workplace productivity, teamwork, firm-worker linked survey, Canada
    JEL: J33 J24 J54
    Date: 2013–12
  8. By: Marco A. Marini (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza"); Paolo Polidori (University of Urbino); Desiree Teobaldelli (University of Urbino); Davide Ticchi (IMT Institute for Advanced Studies Lucca)
    Abstract: One of the standard predictions of the agency theory is that more incentives can be given to agents with lower risk aversion. In this paper we show that this relationship may be absent or reversed when the technology is endogenous and projects with a higher efficiency are also riskier. Using a modified version of the Holmstrom and Milgrom's (1987) framework, we obtain that lower agent's risk aversion unambiguously leads to higher incentives when the technology function linking efficiency and riskiness is elastic, while the risk aversion-incentive relationship can be positive when this function is rigid
    Keywords: principal-agent; incentives; risk aversion; endogenous technology
    Date: 2014
  9. By: Chiraz Ben Ali; Frederic Teulon
    Abstract: Similar to the Security Exchange Commission (SEC), the French Stock Exchange Authority (AMF) issued new board requirements to enhance manager control after financial scandals (2008-2009). This study investigates the relation between corporate governance and CEO pay levels after taking into acc²ount unobservable firm effects, time-varying industry effects, size, and performance. Using a sample of 290 firm-years observations from SBF 120 Index companies (2009-2011), we find that CEO pay is positively associated to (1) board size, (2) the number of board meetings and (3) compensation committee independence. Consistent with Guthrie et al. (2012) findings, our results suggest serious doubt on the effectiveness of new independence board requirement in constraining CEO compensation as suggested by the managerial power hypothesis.
    Keywords: Board of directors,Board meeting frequency, CEO compensation, Corporate governance.
    Date: 2014–01–06
  10. By: Sylvi Rzepka; Marcus Tamm
    Abstract: The new training literature suggests that in a monopsonistic market employers will not only pay for firm-specific training but also for general training if the risk of poaching is limited. This implies that training participation should decrease when competition for employees is higher among firms. Using worker level data for Germany, we find that the hypothesis is supported empirically. Specifically, we find that employees are significantly less likely to participate in training if the density of firms in a sector is higher within the local labor market.
    Keywords: Training; local labor markets; monopsony
    JEL: I24 J24 J42
    Date: 2013–12
  11. By: Kathy Fogel; Liping Ma; Randall Morck
    Abstract: Shareholder valuations are economically and statistically positively correlated with more powerful independent directors, their power gauged by social network power centrality measures. Sudden deaths of powerful independent directors significantly reduce shareholder value, consistent with independent director power “causing” higher shareholder value. Further empirical tests associate more powerful independent directors with fewer value-destroying M&A bids, more high-powered CEO compensation and accountability for poor performance, and less earnings management. We posit that more powerful independent directors can better detect and counter managerial missteps because of their better access to information, their greater credibility in challenging errant top managers, or both.
    JEL: D85 G02 G3 G34 G38 K22 L2 Z13
    Date: 2014–01
  12. By: Biavaschi, Costanza (IZA); Giulietti, Corrado (IZA); Zimmermann, Klaus F. (IZA and University of Bonn)
    Abstract: While a growing literature has analyzed the effects of parental migration on the educational outcomes of children left behind, this is the first study to highlight the importance of sibling interactions in such a context. Using panel data from the RUMiC Survey, we find that sibling influence on schooling performance is stronger among left- behind children. Hence, parental migration seems to trigger changes in the roles and effects among children. However, it is primarily older sisters who exhibit a positive influence on their younger siblings. We corroborate our results by performing a series of tests to mitigate endogeneity issues. The results from the analysis suggest that sibling effects in migrant households might be a mechanism to shape children's outcomes and success and that adjustments within the family left behind have the potential to generate benefits – or reduce hardship – in response to parental migration.
    Keywords: left behind, siblings, human capital
    JEL: O15 J61
    Date: 2013–12
  13. By: Rey Dang; Anne-Françoise Bender; Marie-José Scotto
    Abstract: Our research aims at exploring individual’s characteristics of women on Boards in the French context. In the first part of our paper, we discuss the different theoretical frameworks which supported the business case of gender diversity on Boards of Directors and expose our hypothesis regarding differences in women and men characteristics. The second part presents our methods, measurements and data. Then, we focus on our empirical study. Our sample consists of the French Index SBF 120 companies. We studied the profile of 1,250 directors collecting information from the firms’ annual reports of year 2010, using various scales defined by previous research on that field in the Anglo–Saxon literature. Our findings confirm that integrating women on boards has an impact on the Human and Social Capital of Boards but not as much as might have been expected. It is worth noting that men and women board members seem to build their human and social capital through the same educational process in France. Nonetheless, our work shows significant differences between men and women regarding professional experience and board member status.
    Keywords: Corporate Governance, Boards of Directors, Diversity, Gender, Board Composition
    Date: 2014–01–06
  14. By: Bruno, Bruna; Fiorillo, Damiano
    Abstract: The effects of voluntary work on earnings have recently been studied for some developed countries such as Canada, France and Austria. This paper extends this line of research to Italy, using data from the European Union Statistics on Income and Living Conditions (EU-SILC) dataset. A double methodological approach is used in order to control for unobserved heterogeneity: Heckman and IV methods are employed to account for unobserved worker heterogeneity and endogeneity bias. Empirical results show that, when the unobserved heterogeneity is taken into account, a wage premium of 2.7 percent emerges, quite small if compared to previous investigations on Canada and Austria. The investigation into the channels of influence of volunteering on wages gives support to the hypotheses that volunteering enables the access to fruitful informal networks, avoids the human capital deterioration and provides a signal for intrinsically motivated individuals.
    Keywords: Voluntary work, wages, Mincer equation, selection bias, instrumental variables, Italy
    JEL: C31 C36 D64 J31 Z1
    Date: 2014–01
  15. By: Hanushek, Eric A. (Stanford University); Schwerdt, Guido (Ifo Institute for Economic Research); Wiederhold, Simon (Ifo Institute for Economic Research); Woessmann, Ludger (Ifo Institute for Economic Research)
    Abstract: Existing estimates of the labor-market returns to human capital give a distorted picture of the role of skills across different economies. International comparisons of earnings analyses rely almost exclusively on school attainment measures of human capital, and evidence incorporating direct measures of cognitive skills is mostly restricted to early-career workers in the United States. Analysis of the new PIAAC survey of adult skills over the full lifecycle in 22 countries shows that the focus on early-career earnings leads to underestimating the lifetime returns to skills by about one quarter. On average, a one-standard-deviation increase in numeracy skills is associated with an 18 percent wage increase among prime-age workers. But this masks considerable heterogeneity across countries. Eight countries, including all Nordic countries, have returns between 12 and 15 percent, while six are above 21 percent with the largest return being 28 percent in the United States. Estimates are remarkably robust to different earnings and skill measures, additional controls, and various subgroups. Intriguingly, returns to skills are systematically lower in countries with higher union density, stricter employment protection, and larger public-sector shares.
    Keywords: cognitive skills, education, labor market, earnings, international comparisons
    JEL: J31 I20
    Date: 2013–12

This nep-hrm issue is ©2014 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.