nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2014‒03‒01
thirteen papers chosen by
Tommaso Reggiani
University of Cologne

  1. Dynamic Contracts and Learning by Doing By Prat, Julien
  2. Social Attitudes on Gender Equality and Firms' Discriminatory Pay-Setting By Janssen, Simon; Tuor Sartore, Simone N.; Backes-Gellner, Uschi
  3. Task enjoyment and opportunity costs in the lab - the effect of financial incentives on performance in real effort tasks By Katharina M. Eckartz
  4. Motivating knowledge agents: Can incentive pay overcome social distance? By Erlend Berg; Maitreesh Ghatak; R Manjula; D Rajasekhar; Sanchari Roy
  5. IT and Management in America By Nicholas Bloom; Erik Brynjolfsson; Lucia Foster; Ron Jarmin; Megha Patnaik; Itay Saporta-Eksten; John Van Reenen
  6. Evaluation of the Team-Based Goals and Performance Based Incentives (TBGI) Innovation in Bihar. By Evan Borkum; Anu Rangarajan; Dana Rotz; Swetha Sridharan; Sukhmani Sethi; Mercy Manorajini
  7. Parental Response to Early Human Capital Shocks: Evidence from the Chernobyl Accident By Halla, Martin; Zweimüller, Martina
  8. The Power of (No) Recognition: Experimental Evidence from the University Classroom By Hoogveld, Nicky; Zubanov, Nikolay
  9. Reducing within-group overconfidence through group identity and between-group confidence judgments By Philip Brookins; Adriana Lucas; Dmitry Ryvkin
  10. The Dynamic Effects of Educational Accountability By Hugh Macartney
  11. Performance Effects of Appointing Other Firms' Executive Directors to Corporate Boards: An Analysis of UK Firms By Muravyev, Alexander; Talavera, Oleksandr; Weir, Charlie
  12. Tuition Fees as a Commitment Device By Ketel, Nadine; Linde, Jona; Oosterbeek, Hessel; van der Klaauw, Bas
  13. An Economic Model of Learning Styles By Gervas Huxley; Mike Peacey

  1. By: Prat, Julien (CREST)
    Abstract: This paper studies the design of optimal contracts in dynamic environments where agents learn by doing. We derive a condition under which contracts are fully incentive compatible. A closed-form solution is obtained when agents have CARA utility. It shows that human capital accumulation strengthens the power of incentives and allows the principal to provide the agent with better insurance against transitory risks.
    Keywords: human capital, principal agent problem, moral hazard
    JEL: D82 D83 J24 J41
    Date: 2014–02
  2. By: Janssen, Simon (University of Zurich); Tuor Sartore, Simone N. (University of Zurich); Backes-Gellner, Uschi (University of Zurich)
    Abstract: We analyze the relationship between social attitudes on gender equality and firms' pay-setting behavior by combining information about regional votes relative to gender equality laws with a large data set of multi-branch firms and workers. The results show that multi-branch firms pay more discriminatory wages in branches located in regions with a higher social acceptance of gender inequality than in branches located in regions with a lower acceptance. The results are similar for different subsamples of workers, and we cannot find evidence that regional differences in social attitudes influence how firms assign women and men to jobs and occupations. The investigation of a subsample of performance pay workers for whom we are able to observe their time-based and performance pay component separately shows that social attitudes on gender equality only influence the time-based pay component but not the performance pay component of the same workers. Because regional-specific productivity differences should influence the workers' performance pay and time-based pay, unobserved gender-specific productivity differences are not likely to explain the regional variation in within firm gender pay gaps. The results support theories and previous evidence showing that social attitudes influence gender pay gaps in the long run.
    Keywords: gender pay gaps, social attitudes, firms' pay setting
    JEL: J31 J33 J71 M5
    Date: 2014–02
  3. By: Katharina M. Eckartz (Friedrich-Schiller-University Jena, International Max Planck Research School on Adapting Behavior in a Fundamentally Uncertain World)
    Abstract: This study is directly motivated by the results of Eckartz et al (2012). Subjects exerted suprisingly high efforts irrespectively of how they were compensated. This paper discusses a number of potential explanations and then it will focus on two of them: first, subjects might exert effort simply because they enjoy working on the tasks. Second, subjects might exert effort because they feel obliged to do so or because they do not have opportunity costs of working. These questions are crucial to better understand the robustness of experimental results and also to be eventually able to transfer the results to the world outside the laboratory. We replicate our earlier results: in the baseline treatment we do not find effects of incentive schemes on the output. Decreasing the attractiveness of the tasks, we also do not observe differences between the incentive schemes. When we introduce, however, a paid outside option, the efforts are higher in the performance-dependent pay treatments than under flat payment. The size of the effect differs between the tasks, the direction is, however, the same.
    Keywords: Creativity, Incentives, Real effort task, Experimental methods
    JEL: C90 C91 J33
    Date: 2014–02–19
  4. By: Erlend Berg; Maitreesh Ghatak; R Manjula; D Rajasekhar; Sanchari Roy
    Abstract: This paper studies the interaction of incentive pay and social distance in the dissemination of information. We analyse theoretically as well as empirically the effect of incentive pay when agents have pro-social objectives, but also preferences over dealing with one social group relative to another. In a randomised field experiment undertaken across 151 villages in South India, local agents were hired to spread information about a public health insurance programme. Relative to at pay, incentive pay improves knowledge transmission to households that are socially distant from the agent, but not to households similar to the agent.
    Keywords: public services, information constraints, incentive pay, social proximity, knowledge transmission
    Date: 2014–01
  5. By: Nicholas Bloom; Erik Brynjolfsson; Lucia Foster; Ron Jarmin; Megha Patnaik; Itay Saporta-Eksten; John Van Reenen
    Abstract: The Census Bureau recently conducted a survey of management practices in over 30,000 plants across the US, the first large-scale survey of management in America. Analyzing these data reveals several striking results. First, more structured management practices are tightly linked to higher levels of IT intensity in terms of a higher expenditure on IT and more on-line sales. Likewise, more structured management is strongly linked with superior performance: establishments adopting more structured practices for performance monitoring, target setting and incentives enjoy greater productivity and profitability, higher rates of innovation and faster employment growth. Second, there is a substantial dispersion of management practices across the establishments. We find that 18% of establishments have adopted at least 75% of these more structured management practices, while 27% of establishments adopted less than 50% of these. Third, more structured management practices are more likely to be found in establishments that export, who are larger (or are part of bigger firms), and have more educated employees. Establishments in the South and Midwest have more structured practices on average than those in the Northeast and West. Finally, we find adoption of structured management practices has increased between 2005 and 2010 for surviving establishments, particularly for those practices involving data collection and analysis.
    Keywords: IT, Management, Productivity, Organization
    JEL: M1
    Date: 2014–02
  6. By: Evan Borkum; Anu Rangarajan; Dana Rotz; Swetha Sridharan; Sukhmani Sethi; Mercy Manorajini
    Keywords: TBGI, Team-Based Goals, Performance Based Incentives, Bihar
    Date: 2014–02–14
  7. By: Halla, Martin (University of Linz); Zweimüller, Martina (University of Linz)
    Abstract: Little is known about the response behavior of parents whose children are exposed to an early-life shock. In this paper we interpret the prenatal exposure of the Austrian 1986 cohort to radioactive fallout from the Chernobyl accident as a negative human capital shock and examine their parents' response behavior. To identify causal effects we can rely on exogenous variation in the exposure to radioactive fallout (over time and) between communities due to geographic differences in precipitation at the time of the accident. We find robust empirical evidence of compensating investment behavior by parents in response to the shock. Families with low socioeconomic status reduced their family size, while families with higher socioeconomic status responded with reduced maternal labor supply. Compensating investment made by the latter group seems relatively more effective because we do not find any detrimental long-term effects for exposed children from higher socioeconomic backgrounds. In contrast, exposed children from low socioeconomic backgrounds have significantly worse labor market outcomes as young adults.
    Keywords: fetal origins, parental response, Chernobyl, radiation, health, culling, human capital, fertility, labor supply
    JEL: I18 I20 Q48 Q53 J24
    Date: 2014–02
  8. By: Hoogveld, Nicky (affiliation not available); Zubanov, Nikolay (Goethe University Frankfurt)
    Abstract: We study the effect of recognition on performance with a field experiment involving first-year undergraduate students at a Dutch university. Our treatment, given unannounced in randomly selected student groups, was to publicly recognize students who scored within the top 30% of their group on the first of the two midterm exams. The overall treatment effect on the second midterm grade is 0.03s (s = the grade's standard deviation) for the recipients of recognition, and 0.15s for the non-recipients, both statistically insignificant. The effect for the non-recipients increases with class attendance (itself unaffected), and decreases with the distance to the cutoff grade for recognition, reaching a significant 0.44s for those exceeding the minimum attendance requirement and staying within the first quartile of the distance to cutoff. We argue that conformance to performance norm is the most likely behavioral mechanism behind our findings.
    Keywords: recognition, performance, experiment
    JEL: C93 M52
    Date: 2014–02
  9. By: Philip Brookins (Department of Economics, Florida State University); Adriana Lucas (Department of Economics, Florida State University); Dmitry Ryvkin (Department of Economics, Florida State University)
    Abstract: Overconfidence in one's relative performance within a group is a wide-spread phenomenon. Similar to individual (or within-group) overconfidence, it was also shown that individuals are, on average, overconfident about the performance of their group relative to other groups. We hypothesize that this between-group overconfidence should mitigate within-group individual overconfidence. Simply put, if the decision maker believes that her group's ranking is high it must be because her beliefs about the performance of other members of her group are inflated, which we expect will lead to a reduction in her individual within-group overconfidence. We test this hypothesis in a laboratory experiment. Using a 2x2 between-subject design, we manipulate the salience of between-group confidence judgments and group identity. We find, as hypothesized, that the salience of between-group confidence judgments significantly reduces within-group individual overconfidence. We also find an equally strong reduction in within-group overconfidence from the group identity manipulation. For managers whose goal is to improve calibration of their employees, our results imply that activities promoting comparisons between groups, e.g., between firms or between teams within a firm, and strengthening organizational identity should be helpful.
    Keywords: overconfidence, group identity, judgment about one's group, experiment
    JEL: C91 D03 D83 D84
    Date: 2014–02
  10. By: Hugh Macartney
    Abstract: This paper provides the first evidence that value-added education accountability schemes induce dynamic distortions. Extending earlier dynamic moral hazard models, I propose a new test for ratchet effects, showing that classroom inputs are distorted less when schools face a shorter horizon over which they can influence student performance. I then exploit grade span variation using rich educational data to credibly identify the extent of dynamic gaming, finding compelling evidence of ratchet effects based on a triple-differences approach. Further analysis indicates that these effects are driven primarily by effort distortions, with teacher reallocations playing a secondary role.
    JEL: D82 I21 J33 M52
    Date: 2014–02
  11. By: Muravyev, Alexander (St. Petersburg University GSOM and IZA); Talavera, Oleksandr (University of Sheffield); Weir, Charlie (Robert Gordon University)
    Abstract: This paper studies the effect on company performance of appointing non-executive directors that are also executive directors in other firms. The analysis is based on a new panel dataset of UK companies over 2002-2008. Our findings suggest a positive relationship between the presence of these non-executive directors and the accounting performance of the appointing companies. The effect is stronger if these directors are executive directors in firms that are performing well. We also find a positive effect when these non-executive directors are members of the audit committee. Overall, our results are broadly consistent with the view that non-executive directors that are executives in other firms contribute to both the monitoring and advisory functions of corporate boards.
    Keywords: executive directors, non-executive directors, company performance
    JEL: G34 G39
    Date: 2014–02
  12. By: Ketel, Nadine (VU University Amsterdam); Linde, Jona (VU University Amsterdam); Oosterbeek, Hessel (University of Amsterdam); van der Klaauw, Bas (VU University Amsterdam)
    Abstract: This paper reports on a field experiment testing for sunk-cost effects in an education setting. Students signing up for extra-curricular tutorial sessions randomly received a discount on the tuition fee. The sunk-cost effect predicts that students who receive larger discounts will attend fewer tutorial sessions. For the full sample, we find little support for this hypothesis, but we find a significant effect of sunk costs on attendance for the 45% of students in our sample who are categorized as sunk-cost prone based on hypothetical survey questions. For them higher tuition fees can serve as a commitment device to attend classes.
    Keywords: sunk-cost effect, higher education, field experiment
    JEL: C93 D03 I22
    Date: 2014–02
  13. By: Gervas Huxley; Mike Peacey
    Abstract: Much of the economic literature on education treats the actual process of learning as a `black box'. While these `black box' models have many interesting uses, they are of little use when a college seeks advice about reallocating resources from one input to another (e.g. from lecture hours to tutorials). Commenting on such questions requires us to `open up' the black box. In this paper, we show what one such model would look like by explicitly modelling how students vary in their `learning styles'. This model allows us to simulate how reforms to higher education would affect students with different learning styles. We consider alternative tuition fee structures and the technological change that has led to the introduction of massive open online courses (MOOCs).
    Keywords: Human Capital, Education Production Function, Learning Style, Independent Learner, MOOC
    JEL: I20 I23
    Date: 2014–02

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