nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2014‒02‒02
thirty-two papers chosen by
Tommaso Reggiani
University of Cologne

  1. Trade, Technologies and the Talent Organization By Schymik, Jan
  2. Employee recognition and performance: A field experiment By Dur R.; Neckermann S.; Bradler C.; Non J.A.
  3. Strive to be first and avoid being last: An experiment on relative performance incentives By Lindner, Florian; Dutcher, E. Glenn; Balafoutas, Loukas; Ryvkin, Dmitry; Sutter, Matthias
  4. Delegation, worker compensation, and strategic competition By Güth, Werner; Pull, Kerstin; Stadler, Manfred
  5. Effort Incentives and On-the-Job Search: An Alternative Role for Efficiency Wages in Employment Contracts By Herbold, Daniel
  6. Gaming and Strategic Opacity in Incentive Provision By Florian Ederer; Richard Holden; Margaret Meyer
  7. Should I stay or should I go? - The Effect of Performance Pay on the Retention of Apprenticeship Graduates By Rinawi, Miriam; Backes-Gellner, Uschi
  8. A Romanian approach of the program "Employee of the month" By Armean, Bianca; Baleanu, Virginia; Irimie, Sabin Ioan
  9. The Impact of Managerial Change on Performance. The Role of Team Heterogeneity By Mühlheußer, Gerd; Sliwka, Dirk; Hentschel, Sandra
  10. Multitasking and the Benefits of Objective Performance Measurement - Evidence from a Field Experiment By Sliwka, Dirk; Manthei, Kathrin
  11. Hierarchical Organization and Performance Inequality: Evidence from Professional Cycling By Bertrand Candelon; Arnaud Dupuy
  12. The role of managerial work in market performance: A monopoly model with team production By Hildenbrand, Andreas; Duran, Mihael
  13. Competencies: requirements and acquisition By Meng C.M.; Peters Z.; Verhagen A.M.C.; Künn-Nelen A.C.
  14. Wage Floors, Imperfect Performance Measures, and Optimal Job Design By Schöttner, Anja; Kragl, Jenny
  15. Wage Bargaining when Workers Have Fairness Concerns By Kragl, Jenny; Gogova, Martina
  16. Gender Differences in Competition and Sabotage By Dato, Simon; Nieken, Petra
  17. Skills and the graduate recruitment process: Evidence from two discrete choice experiments By Velden R.K.W. van der; Humburg M.
  18. Incentive Design and Distorted Behavior By Schnedler, Wendelin
  19. Bad Mergers Revisited: An Incentive Perspective By Kräkel, Matthias; Müller, Daniel
  20. Transferability of Human Capital and Immigrant Assimilation: An Analysis for Germany By Kramer, Anica; Basilio, Leilanie; Bauer, Thomas K.
  21. What is expected of higher education graduates in the 21st century? By Humburg M.; Velden R.K.W. van der
  22. Productivity and age: Evidence from work teams at the assembly line By Weiss M.; B?rsch-Supan A.
  23. Skill mismatch and skill use in developed countries: Evidence from the PIAAC study By Levels M.; Velden R.K.W. van der; Levels M.; Allen J.P.
  24. Personality and field of study choice By Humburg M.
  25. The returns to education for opportunity entrepreneurs, necessity entrepreneurs, and paid employees By Fossen, Frank; Büttner, Tobias
  26. The Hidden Costs of Downsizing By Heinz, Matthias; Drzensky, Frank
  27. Human Capital Diversity and Entrepreneurship. Results from the regional individual skill dispersion nexus on self-employment activity. By Dirk Oberschachtsiek
  28. Teacher opinions on performance incentives : evidence from the Kyrgyz Republic By Lockheed, Marlaine E.
  29. How managerial wage transparency may reduce shareholder returns Evidence from an experiment By Werner, Peter; Bolton, Gary; Ockenfels, Axel
  30. Reciprocal preferences and the unraveling of gift-exchange By Riedl A.M.; Dariel A.
  31. Intertemporal Effort Provision in Sequential Tournaments By Klein, Arnd Heinrich; Schmutzler, Armin
  32. Productivity Response to a Contract Change By Rajshri Jayaraman; Debraj Ray; Francis de Vericourt

  1. By: Schymik, Jan
    Abstract: This paper introduces the theory of firm organization under moral hazard into an equilibrium model of international trade with heterogeneous talents and technologies. The model is able to explain how the allocation of power and the provision of financial incentives inside firms varies within and across industries. Variation in the value of outside options triggers owners to choose different levels of firm organization and financial incentives. While incentive compensation and centralized decision-making are substitutes for human capital scarce firms, human capital intensive firms use incentive compensation and the delegation of power as complements to keep their managers participating. Trade liberalizations and skill-biased technological changes affect the distribution of outside options and thus let firms reorganize and provide different financial incentives. Trade integrations may lead firms to endogenously choose organizations with powerful managers and consequently managerial entrenchment arises in the most productive firms. --
    JEL: F12 L22 D23
    Date: 2013
  2. By: Dur R.; Neckermann S.; Bradler C.; Non J.A. (GSBE)
    Abstract: This paper reports the results from a controlled field experiment designed to investigate the causal effect of public recognition on employee performance. We hired more than 300 employees to work on a three-hour data-entry task. In a random sample of work groups, workers unexpectedly received recognition after two hours of work. We find that recognition increases subsequent performance substantially, and particularly so when recognition is exclusively provided to the best performers. Remarkably, workers who did not receive recognition are mainly responsible for this performance increase. This result is consistent with workers having a preference for conformity.
    Keywords: Field Experiments; Personnel Economics: Compensation and Compensation Methods and Their Effects;
    JEL: C93 M52
    Date: 2013
  3. By: Lindner, Florian; Dutcher, E. Glenn; Balafoutas, Loukas; Ryvkin, Dmitry; Sutter, Matthias
    Abstract: Managers often use tournament incentive schemes which motivate workers to compete for the top, compete to avoid the bottom, or both. In this paper we test the effectiveness and efficiency of these incentive schemes. To do so, we utilize optimal contracts in a principal-agent setting, using a Lazear-Rosen type model that predicts equal effort and efficiency levels for three tournament incentive schemes: reward tournaments, punishment tournaments, and tournaments combining reward and punishment. We test the model s predictions in a laboratory experiment and find that the combination of reward and punishment produces the highest effort from agents, especially in contests of a relatively larger size. Punishment is shown to be more effective and, in larger contests, more efficient than rewards, and it is also the mechanism with the lowest variance of effort. Finally, we show that behavior in all mechanisms is consistent with a model of basic directional and reinforcement learning. --
    JEL: M52 J33 C90
    Date: 2013
  4. By: Güth, Werner; Pull, Kerstin; Stadler, Manfred
    Abstract: We study interfirm competition on a product market where effort decisions are delegated to the firms' workers. Intrafirm organization is captured by a principal-multiagent framework where firm owners implement alternative compensation schemes for the workers. We show that the value of delegation as well as the optimal design of the compensation scheme crucially depend on the intensity of competition. In particular, our model explains why piece rates and performance-based revenue sharing may be observed in different markets at the same time. --
    Keywords: delegation,agency theory,compensation schemes
    JEL: C72 L22 M52
    Date: 2014
  5. By: Herbold, Daniel
    Abstract: We study an infinitely repeated principal-agent relationship with on-the-job search. On-the-job search is modeled as a dimension of the agent's effort vector that has no effect on output, but raises his future outside option. The agent's incentives to search are increasing in the degree to which a higher outside option improves his gains from trade. Search also increases the agent's cost of effort thus generating an effort-substitution problem between work and search effort. We show that the principal can mute search incentives by offering an e fficiency wage contract. Due to effort substitution, e fficiency wages increase the agent's work effort incentives for a given bonus scheme. Thus, effi ciency wages serve as a complement rather than as a substitute to piece rates. Our results provide a new rationale for the use of effi ciency wages as an incentive device and hence greatly extend the set of environments in which e fficiency wages are predicted to be useful as an incentive device. Our findings thus also contribute to the explanation of empirically observed inter-industry variation in the size and composition of worker compensation. --
    JEL: C73 D86 J33
    Date: 2013
  6. By: Florian Ederer (Cowles Foundation & SOM, Yale University); Richard Holden (Australian School of Business, University of New South Wales); Margaret Meyer (Dept. of Economics, Nuffield College)
    Abstract: It is often suggested that incentive schemes under moral hazard can be gamed by an agent with superior knowledge of the environment, and that deliberate lack of transparency about the incentive scheme can reduce gaming. We formally investigate these arguments in a two-task moral hazard model in which the agent is privately informed about which task is less costly for him to work on. We examine two simple classes of incentive scheme that are "opaque" in that they make the agent uncertain ex ante about the values of the incentive coefficients in the linear payment rule. We show that, relative to deterministic menus of linear contracts, these opaque schemes induce more balanced efforts, but they also impose more risk on the agent per unit of aggregate effort induced. We identify settings in which optimally designed opaque schemes not only strictly dominate the best deterministic menu but also completely eliminate the efficiency losses from the agent's better knowledge of the environment. Opaque schemes are more likely to be preferred to transparent ones when i) efforts on the tasks are highly complementary for the principal; ii) the agent's privately known preference between the tasks is weak; iii) the agent's risk aversion is significant; and iv) the errors in measuring performance on the tasks have large correlation or small variance.
    Keywords: Incentives, Gaming, Contracts, Opacity
    JEL: D86 D21 L22
    Date: 2014–01
  7. By: Rinawi, Miriam; Backes-Gellner, Uschi
    Abstract: This paper investigates how training firms retain their apprenticeship graduates if they are embedded in labor markets without the frictions that the new training literature considers to be essential for investments in general human capital. We hypothesize that performance pay schemes are an additional firm-level tool to increase the retention of graduates. We argue that firms with performance pay schemes are more likely to engage in apprenticeship training than firms not offering performance pay. This paper uses representative data from a large employer-employee panel data set and accounts for unobserved heterogeneity by employing fixed-effects estimations. We find that the performance pay rate has a significantly positive effect on a firm's share of internal apprenticeship graduates. Our results can be interpreted as an indication that performance pay firms are more likely to invest in training, as they can successfully retain their graduates. --
    JEL: J24 J33 C23
    Date: 2013
  8. By: Armean, Bianca; Baleanu, Virginia; Irimie, Sabin Ioan
    Abstract: Work motivation was and remained a "hot topic" for management and organizational behavior studies, as well as a major concern for practice of Human Resource Management. While such studies have evidenced a lot of factors of intrinsic and extrinsic motivation having different influences on different people, the motivating practices within organizations were long time focused on common extrinsic motivators such as usual rewards (in the form of money or promotion to higher grades/functions) and threat of punishment. However, during the past few decades more and more organizations worldwide became interested to use some forms and tools of intrinsic motivation for their employees, including recognition programs. Our paper aims to present and discuss how a Romanian organization developed and implemented such a program, based on the popular U.S. organizational practices of contests type "Employee of the Month". Particularly, the study focuses on the specificity of this approach which combines elements of intrinsic and extrinsic motivation, and also attempts to sketch a "profile of the winner employee", based on statistical analysis of data for people who benefited the awards through the program application during 2008-2011.
    Keywords: work motivation, job satisfaction, organizational performance
    JEL: J28 L25 M12 M52
    Date: 2012–01
  9. By: Mühlheußer, Gerd; Sliwka, Dirk; Hentschel, Sandra
    Abstract: When a key responsibility of a manager is to allocate more or less attractive tasks to subordinates, these subordinates have an incentive to work hard and demonstrate their talents. As a new manager is less well acquainted with these talents this incentive mechanism is reinvigorated after a management change but only when the team is sufficiently homogenous. Otherwise, a new manager quickly makes similar choices as the old one did. We investigate this hypothesis using a large data set on coach dismissals in the German football league where the selection of players is indeed a key task of the coach. Indeed, we find substantial evidence that coach replacements enhance team performance (only) in homogenous teams. Moreover, from a methodological point of view, we argue that there is typically a negative selection bias when evaluating succession effects, which might reconcile previous findings of no (or even negative) effects with the vast number of dismissals observed in reality. --
    JEL: D22 J44 J63
    Date: 2013
  10. By: Sliwka, Dirk; Manthei, Kathrin
    Abstract: We examine the benefits of objective performance measurement in a field experiment conducted in a retail bank. At the outset objective performance measures of pro fits in each branch were only available on the branch level and managers allocated bonuses to their employees based on subjective assessments. In a subset of the branches, managers then obtained access to individual performance measures. We find a significant positive impact of objective performance measurement on effort and financial performance. This productivity increase is mainly driven by larger branches and higher sales for non-core products which is well in line with a formal economic model on the optimal allocation of monitoring efforts under subjective evaluations in multitask environments. --
    JEL: C93 J33 D23
    Date: 2013
  11. 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
  12. By: Hildenbrand, Andreas; Duran, Mihael
    Abstract: A monopolist is treated as a nexus of contracts with team production. It has one ownermanager. The owner-manager is the employer of two employees. A team production problem is present if the employer is a managerial lemon. If the team production problem is solved, the employer is a managerial hotshot. Both a managerial hotshot and a managerial lemon are found to make profit. Managerial slack can therefore exist in our monopoly market. In the case of a managerial lemon, the profit level is lower. However, the employees' utility level is higher. Whereas the employer has an incentive to improve management capability in principle, the employees have an incentive to keep management capability low. Moreover, the cost of improving management capability may be prohibitively high. Managerial slack can therefore persist. The predicted behavior of the monopolist is grounded in individual behavior under the assumption of utility maximization. --
    Keywords: firm organization,market structure,property rights
    JEL: C7 D2 D4 L1 L2
    Date: 2013
  13. By: Meng C.M.; Peters Z.; Verhagen A.M.C.; Künn-Nelen A.C. (ROA)
    Abstract: Higher education is given the key task to prepare the highly talented among the young to fulfil highly qualified roles in the labour market. Successful labour market performance of graduates is generally associated with the acquisition of the correct competencies. Education as an individual investment in human capital is a viewpoint dating back to the 17th century and the writings of Sir William Petty 1662, and includes later work by Adam Smith 1776. The idea was formalized and brought into mainstream economics by Schultz 1961, Becker 1964 and Mincer 1970, 1974. The strong supply-side orientation of the human capital theorys determination of labour productivity has also raised serious doubts. One of the first major competitors of the human capital theory was the job competition model Thurow, 1975, in its most extreme form explaining productivity entirely by occupational characteristics. Both the human capital theory and the job competition model in their original versions seem to be too restricted to one side of the labour market. More recently, therefore, approaches that allow explicitly for an interaction between supply-side and demand-side characteristics assignment models have been placed centrally in analyses of education-to-work stages. For a good overview of different assignment models and their distinctive features with respect to matching models, such as proposed by Mortensen 1986, or search theories e.g. Jovanovic, 1979, see Dupuy 2004.
    Date: 2013
  14. By: Schöttner, Anja; Kragl, Jenny
    Abstract: We analyze the effects of wage floors on optimal job design in a moral-hazard model with asymmetric tasks and imperfect aggregate performance measurement. Due to cost advantages of specialization, assigning the tasks to different agents is efficient. A sufficiently high wage floor, however, induces the principal to dismiss one agent or to even exclude tasks from the production process. Imperfect performance measurement always lowers profit under multitasking, but may increase profit under specialization. We further show that variations in the wage floor and the agents' reservation utility have significantly different effects on welfare and optimal job design. --
    JEL: M52 M51 M54
    Date: 2013
  15. By: Kragl, Jenny; Gogova, Martina
    Abstract: We analyze optimal labor contracts when the worker is inequity averse towards the employer. Welfare is maximized for an equal sharing rule of surplus between the worker and the firm. That is, profit sharing is optimal even if effort is contractible. If the firm can make a take-it-or leave-it offer, the optimal contract is also state-dependent but always suboptimal with respect to welfare. The reason is that the firm will always pay the worker less than half of the surplus, thereby leading to agency costs due inequity aversion. If the parties bargain over the optimal contract, the optimal division of surplus is more equitable compared to the case with a purely selfish worker. Moreover, the optimal contract with bargaining approaches the welfare-optimal contract as the parties' bargaining power converges. Our results help explain why workers are willing to accept lower wages in times of crisis but demand higher wages in times of economic rise. Moreover, our findings imply that raising the bargaining power of the less powerful party may increase welfare --
    JEL: M52 D03 D86
    Date: 2013
  16. By: Dato, Simon; Nieken, Petra
    Abstract: We study the differences in behavior of males and females in a two-player tournament with sabotage in a controlled lab experiment. Implementing a real-effort design and a principal who is paid based on the agent s output, we find that males and females do not differ in their achievements in the real effort task but in their choice of sabotage. Males select significantly more sabotage leading to an on average higher winning probability but not to higher profits. If the gender of the opponent is revealed before the tournament, males increase their performance in the real effort task especially if the opponent is female. The gender gap in sabotage is persistent. We discuss possible explanations for our findings and their implications. --
    JEL: C91 J16 M52
    Date: 2013
  17. By: Velden R.K.W. van der; Humburg M. (ROA)
    Abstract: In this study we elicit employers preferences for a variety of CV attributes and types of skills when recruiting university graduates. Using two discrete choice experiments, we simulate the two common steps of the graduate recruitment process 1 the selection of suitable candidates for job interviews based on CVs, and 2 the hiring of graduates based on observed skills. We show that in the first step, employers attach most value to CV attributes which signal a high stock of occupation-specific human capital indicating low training costs and short adjustment periods; attributes such as relevant work experience and a good match between the field of study and the job tasks. In line with the preferences in the first step, employers actual hiring decision is mostly influenced by graduates level of professional expertise and interpersonal skills. Other types of skills also play a role in the hiring decision but are less important, and can therefore not easily compensate for a lack of occupation-specific human capital and interpersonal skills.
    Keywords: Analysis of Education; Human Capital; Skills; Occupational Choice; Labor Productivity;
    JEL: J24 I21
    Date: 2014
  18. By: Schnedler, Wendelin
    Abstract: Incentives often distort behavior: they induce agents to exert effort but this effort is not employed optimally. This paper proposes a theory of incentive design allowing for such distorted behavior. At the heart of the theory is a trade-off between getting the agent to exert effort and ensuring that this effort is used well. The theory covers various moral-hazard models, ranging from traditional single-task to multi-task models. It also provides -for the first time- a formalization and proofs for various widely-spread perceived wisdoms about incentive design and distorted behavior. --
    JEL: M52 D86 J33
    Date: 2013
  19. By: Kräkel, Matthias; Müller, Daniel
    Abstract: We consider a two-stage principal-agent model with limited liability in which a CEO is employed as agent to gather information about suitable merger targets and to manage the merged corporation in case of an acquisition. Our results show that the CEO systematically recommends targets with low synergies even when targets with high synergies are available to obtain high-powered incentives and, hence, a high personal income at the merger-management stage. We derive conditions under which shareholders prefer a self-commitment policy or a rent-reduction policy to deter the CEO from opportunistic recommendations. --
    JEL: D82 D86 G34
    Date: 2013
  20. By: Kramer, Anica; Basilio, Leilanie; Bauer, Thomas K.
    Abstract: This paper investigates the transferability of human capital across countries and the contribution of imperfect human capital portability to the explanation of the immigrant-native wage gap. Using data for West Germany, our results reveal that, overall, education and labor market experience accumulated in the home countries of the immigrants receive signi cantly lower returns than human capital obtained in Germany. We further nd evidence for heterogeneity in the returns to human capital of immigrants across origin countries. Finally, imperfect human capital transferability appears to be a major factor in explaining the wage di erential between natives and immigrants. --
    JEL: J61 J31 J24
    Date: 2013
  21. By: Humburg M.; Velden R.K.W. van der (GSBE)
    Abstract: In this paper, we reflect on the skills higher education graduates are expected to have in todays economy and the role of higher education in equiping graduates with these skills. First, we identify 6 trends which form the basis of the changing role of graduates in economic life. These trends are the knowledge society, increasing uncertainty, the ICT revolution, high performance workplaces, globalization, and the change of the economic structure. By changing the nature and range of tasks graduates are expected to fulfil in todays economy, we argue that these trends generate new and intensify traditional skill demands, which we summarize as professional expertise, flexibility, innovation and knowledge management, mobilization of human resources, international orientation, and entrepreneurship. Second, we draw out some key issues concerning the role of higher education institutions in equiping graduates with these skills.
    Keywords: Analysis of Education; Education and Economic Development; Education: Government Policy; Human Capital; Skills; Occupational Choice; Labor Productivity;
    JEL: I21 I25 I28 J24
    Date: 2013
  22. 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
  23. By: Levels M.; Velden R.K.W. van der; Levels M.; Allen J.P. (ROA)
    Abstract: In this paper we develop and test a new set of measures of skill mismatches, based on data on skill levels and skill use in the domains of literacy and numeracy from the PIAAC project. The measures we develop represent the extent of skill use relative to ones own skill level. We test the measures by examining their relation to a number of labour market outcomes. We subsequently examine how mismatches are distributed across and within a large number of countries, and use our results to reflect on possible causes and consequences of mismatches. We find that, in general, higher skill utilization is always beneficial in terms of productivity and job satisfaction, and that overutilization of skills therefore points more towards a fuller use of the available human capital, rather than to a serious skill shortage. We find an asymmetry in returns between literacy and numeracy skills although numeracy skill level appears to pay higher dividends than literacy skill level, shifts in skill utilization within skill levels have greater consequences for literacy than for numeracy. The distribution of mismatches across and within countries is broadly consistent with the expectation that skills will be used more fully under competitive market conditions with few institutional or organizational barriers. Finally, skill mismatches are only quite weakly related to educational mismatches, reflecting the heterogeneity in skill supply and demand that cross-cuts the dividing lines set by formally defined qualification levels and job titles.
    Keywords: Analysis of Education; Education and Economic Development; Labor Demand; Human Capital; Skills; Occupational Choice; Labor Productivity;
    JEL: I21 I25 J23 J24
    Date: 2013
  24. By: Humburg M. (ROA)
    Abstract: Field of study choice has far-reaching implications for individuals enrolling in university. Field of study choice is strongly linked to the subject matter graduates will specialize in, the kind of work environment they will be working in, and the returns to their skills they can expect once they enter the workforce. This paper uses unique Dutch data which demonstrates that personality measured at age 14 can be linked to field of study choice at around age 19. It can be shown that the Big Five personality traits affect field of study choice. Moreover, while personality matters less than cognitive skills, such as math ability and verbal ability, for educational attainment, the influence of personality on field of study choice is comparable to that of cognitive skills. Sorting across fields of study on the basis of personality traits is in some respects similar for women and men, although substantial differences exist.
    Keywords: Analysis of Education; Human Capital; Skills; Occupational Choice; Labor Productivity;
    JEL: I21 J24
    Date: 2014
  25. By: Fossen, Frank; Büttner, Tobias
    Abstract: We assess the relevance of formal education on the productivity of the self-employed and distinguish between opportunity entrepreneurs, who voluntarily pursue a business opportunity, and necessity entrepreneurs, who lack alternative employment options. We expect differences in the returns to education between these groups due to different levels of control over the use of their human capital. The analysis employs the German Socio-economic Panel and accounts for the endogeneity of education and non-random selection. The results indicate that the returns to a year of education for opportunity entrepreneurs are 3.5 percentage points higher than the paid employees' rate of 8.1%, but 6.5 percentage points lower for necessity entrepreneurs. Pooling the two types of entrepreneurs understates the value of education for opportunity entrepreneurs and sparks misguided hopes concerning necessity entrepreneurs. The results explain Europe/US differences in average entrepreneurial returns and cast doubt on the use of the self-employed to test signalling theory. --
    JEL: I20 J23 J24
    Date: 2013
  26. By: Heinz, Matthias; Drzensky, Frank
    Abstract: We analyze whether a principal s decision to layoff an agent affects the performance of the surviving agents. To study the impact of the decision in isolation, we conducted an experimental principal-agent game. We find that agents reduce their performance by 37% as a response to the decision. Heterogeneity in principals decisions can largely be explained by different beliefs about how agents react to layoffs. --
    JEL: J63 C91 J82
    Date: 2013
  27. By: Dirk Oberschachtsiek (Leuphana University Lueneburg, Germany)
    Abstract: Human capital has been shown to be highly important in the venture creation process. In this study, we account for the fact that human capital on the individual and regional levels may be interrelated in affecting entrepreneurship. We use German survey data, which allow us to focus on a specific measure of human capital (diversity in task experience) and to study the individual and regional levels. Our research provides evidence for the thesis that diverse human capital increases the level of entrepreneurship activity via individual and aggregated pathways and that the price elasticity of diverse human capital in affecting business activity is low.
    Keywords: entrepreneurship capital, human capital, nascent entrepreneur, multilevel analysis
    JEL: L26 J23 J24
    Date: 2013–12
  28. By: Lockheed, Marlaine E.
    Abstract: This paper uses data from a post-hoc evaluation of a performance-based teacher incentive program in the Kyrgyz Republic to examine the opinions of teachers receiving different pay bonuses based on their performance as assessed by external evaluators. Overall, teacher opinions of the program were favorable, although teachers who received lower performance ratings held less favorable opinions about the motivational aspects of the program. Despite this, lower-rated teachers were more likely to report that they used what they learned to evaluate their own teaching, as compared with more highly rated teachers, and were more likely to take professional development courses in the years following the program's implementation.
    Keywords: Tertiary Education,Teaching and Learning,Education For All,Primary Education,Secondary Education
    Date: 2014–01–01
  29. By: Werner, Peter; Bolton, Gary; Ockenfels, Axel
    Abstract: We study the role of transparency in a novel three-person profit sharing game in which managers and board directors decide on how to distribute the revenues of a company among themselves and shareholders, who are the residual claimants of the companies revenues. We examine two hypotheses. One is that the distribution of revenues is largely determined by an informal quid pro quo among the two decision makers at the expense of shareholders. The second hypothesis is that public transparency attenuates exaggerated manager pay because of increased social pressure. We find strong support for our first hypothesis, but reject the second one: Public transparency actually increases managerial wages as well as board director compensation, further reducing the revenue share that goes to shareholders. Competition to keep managers further magnifies these patterns. --
    JEL: C92 G34 D63
    Date: 2013
  30. By: Riedl A.M.; Dariel A. (GSBE)
    Abstract: We elicit reciprocal preferences in a firm-worker gift-exchange setting and relate them to actual behavior in a repeated gift-exchange game. We find that only a small minority of 10 percent of workers is materially selfish whereas 90 percent exhibit reciprocal preferences. However, the intensity of reciprocal preferences is weak in the sense that firms maximize profits by not relying on gift-exchange but by offering the lowest possible wage. Workers behavior in the repeated gift-exchange game is predicted by their elicited preferences, but the correlation between preferences and behavior is imperfect. Together with profit maximizing behavior of firms these observations can explain the observed unraveling of gift-exchange over time in our experiment and some recent field experiments.
    Keywords: Noncooperative Games; Design of Experiments: Laboratory, Group Behavior; Labor-Management Relations, Trade Unions, and Collective Bargaining: Other;
    JEL: C72 C92 J59
    Date: 2013
  31. By: Klein, Arnd Heinrich; Schmutzler, Armin
    Abstract: This paper analyzes intertemporal effort provision in two-stage tournaments. A principal with a fixed budget for prizes faces two risk-neutral agents. He observes noisy signals of effort in both periods. His goal is to maximize either total efforts (perfect substitutes) or the product of first- and second-period efforts (imperfect substitutes). He decides (i) how to weigh performance in the two periods when awarding the second period prize, (ii) how to spread prize money across the two periods, and (iii) whether to reveal performance after the first period. Under very general conditions, the principal puts positive weight on both periods in period two. Furthermore, he sets no first-period prize provided the observations in period one are too noisy. The information revelation policy depends on the third derivative of the effort cost function. --
    JEL: D02 D44 D00
    Date: 2013
  32. By: Rajshri Jayaraman; Debraj Ray; Francis de Vericourt
    Abstract: This paper studies the productivity impact of a contract change for tea pluckers in an Indian plantation. The contract, implemented at the end of a three-year cycle in which contracts are generally revised, was (a) the joint outcome of negotiations between twenty unions and plantations, (b) mandated to respect a state government notification stipulating a new minimum wage for plantation workers statewide, and (c) applicable equally to all the plantations in the local region. The contract raised the baseline wage by 30% but lowered marginal incentives, by shifting the existing piece rates to higher minimum thresholds and eliminating an existing penalty per unit for low output. In the one month following the contract change, output increased by a factor between 30-60%, the exact number depending on the choice of counterfactual and the set of controls applied. This large and contrarian response to a flattening of marginal incentives is at odds with the standard model, including one that incorporates dynamic incentives, and it can only be partly accounted for by higher supervisory effort. We conclude that the increase is a “behavioral” response. Yet in subsequent months, the increase is comprehensively reversed. In fact, an entirely standard model with no behavioral or dynamic features that we estimate off the pre-change data, fits the observations four months after the contract change remarkably well. While not an unequivocal indictment of the recent emphasis on “behavioral economics,” the findings suggest that non-standard responses may be ephemeral, especially in employment contexts in which the baseline relationship is delineated by financial considerations in the first place. From an empirical perspective, therefore, it is ideal to examine responses to a contract change over an substantial period of time.
    JEL: J43 L14 O13
    Date: 2014–01

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