nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2014‒04‒29
ten papers chosen by
Tommaso Reggiani
University of Cologne

  1. A Field Experiment in Motivating Employee Ideas By Gibbs, Michael; Neckermann, Susanne; Siemroth, Christoph
  2. Trust-Based Work-Time and Product Improvements: Evidence from Firm Level Data By Godart, Olivier; Görg, Holger; Hanley, Aoife
  3. Gender Pay Gaps among Highly Educated Professionals: Compensation Components Do Matter By Grund, Christian
  4. Stepping Stone and Option Value in a Model of Postsecondary Education By Trachter, Nicholas
  5. Candidates' Quality and Electoral Participation: Evidence from Italian Municipal Elections By De Benedetto, Marco Alberto; De Paola, Maria
  6. Why Do We Ignore the Risk in Schooling Decisions? By Hartog, Joop; Diaz-Serrano, Luis
  7. Playing 'Hard to Get': An Economic Rationale for Crowding Out of Intrinsically Motivated Behavior By Schnedler, Wendelin; Vanberg, Christoph
  8. Are Employee Stock Option Exercise Decisions Better Explained through the Prospect Theory? By Bahaji, Hamza
  9. Corporate Volunteering And Its Influence On Employee Civil Engagement In Russia By Irina I. Krasnopolskaya
  10. Optimal Delegated Search with Adverse Selection and Moral Hazard By Ulbricht, Robert

  1. By: Gibbs, Michael (University of Chicago); Neckermann, Susanne (Erasmus University Rotterdam); Siemroth, Christoph (University of Mannheim)
    Abstract: We study the effects of a field experiment designed to motivate employee ideas, at a large technology company. Employees were encouraged to submit ideas on process and product improvements via an online system. In the experiment, the company randomized 19 account teams into treatment and control groups. Employees in treatment teams received rewards if their ideas were approved. Nothing changed for employees in control teams. Our main finding is that rewards substantially increased the quality of ideas submitted. Further, rewards increased participation in the suggestion system, but decreased the number of ideas per participating employee, with zero net effect on the total quantity of ideas. The broader participation base persisted even after the reward was discontinued, suggesting habituation. We find no evidence for motivational crowding out. Our findings suggest that rewards can improve innovation and creativity, and that there may be a tradeoff between the quantity and quality of ideas.
    Keywords: innovation, creativity, intrinsic motivation, incentives
    JEL: C93 J24 M52 O32
    Date: 2014–04
  2. By: Godart, Olivier (Kiel Institute for the World Economy); Görg, Holger (Kiel Institute for the World Economy); Hanley, Aoife (Kiel Institute for the World Economy)
    Abstract: We explore whether the introduction of trust based working hours is related to the subsequent innovation performance of firms. Employing a panel data set of over 5,000 German establishments, we implement a propensity score matching approach where we only consider firms that did not use trust based work contracts initially. Our results show that firms which adopt such contracts tend to be between 11 to 14 percent more likely to improve products. These results hold when we control for another form of flexible time work arrangements, namely working time accounts. Thus, the positive relationship between the adoption of trust based working hours and innovation seems to be driven by the degree of control and self-management over working days, rather than by merely allowing time flexibility.
    Keywords: trust based work time, innovation, firm performance
    JEL: M54 M12
    Date: 2014–04
  3. By: Grund, Christian (RWTH Aachen University)
    Abstract: Making use of panel data from a survey of highly educated professionals, gender pay gaps are explored with regard to total compensation as well as to individual compensation components. The results indicate meaningful male-female wage differentials for this quite homogeneous group of people working in one specific industry: in particular for more experienced employees in higher positions of firm hierarchies with children. Gender pay gaps are much more pronounced for bonus payments than they are for fixed salaries.
    Keywords: bonus payments, fixed salaries, gender wage gap, management compensation
    JEL: M52 J31 J33
    Date: 2014–04
  4. By: Trachter, Nicholas (Federal Reserve Bank of Richmond)
    Abstract: A stepping stone arises in risky environments with learning and transferable human capital. An example is the role played by academic two-year colleges in postsecondary education: Students, as they learn about the uncertain educational outcomes, can drop out or transfer up to harder and more rewarding schools, carrying a fraction of the accumulated human capital. A theory of education is built and contrasted empirically to find that i) option value explains a large part of returns to enrollment, ii) enrollment in academic two-year colleges is driven by the option to transfer up, and iii) the value of the stepping stone is small.
    Keywords: stepping stone; investment under uncertainty; academic learning; postsecondary education; college education; returns to education
    JEL: D83 I21 J24
    Date: 2014–02–04
  5. By: De Benedetto, Marco Alberto (Birkbeck, University of London); De Paola, Maria (University of Calabria)
    Abstract: We analyze the impact of the quality of candidates running for a mayor position on turnout using a large data set on Italian municipal elections held from 1993 to 2011. We firstly estimate a municipal fixed effects model and show that an increase in the average quality of candidates competing at the electoral race produces a positive impact on turnout. To handle endogeneity issues arising from time variant unobservable features of electoral races, we build on the literature showing that politicians' quality is positively affected by their wage and apply a Fuzzy Regression Discontinuity Design relying on the fact that in Italy the wage of the mayor increases non-monotonically at different thresholds. Results show that an exogenous increase in the average quality of candidates, induced by a higher wage, leads to an increase in turnout by about 2 percentage points.
    Keywords: politicians' quality, turnout, fuzzy regression discontinuity design, instrumental variables
    JEL: D72 D78 J45
    Date: 2014–04
  6. By: Hartog, Joop (University of Amsterdam); Diaz-Serrano, Luis (Universitat Rovira i Virgili)
    Abstract: While uncertainty abounds in almost any decision on investment in schooling, it is mostly ignored in research and virtually absent in labour economics text books. This paper documents the scope for risk, discusses the tough disentanglement of heterogeneity and risk, surveys the analytical models, laments the absence of a good workhorse model and points out the challenges worth tackling: document ex ante risk that investors face, develop a tractable and malleable analytical model and integrate the option of consumption smoothing in analytical and empirical work. Hedging labour market risk in the stock market can be safely ignored.
    Keywords: schooling, risk, human capital, labour supply
    JEL: I21 J22 J24 J31
    Date: 2014–04
  7. By: Schnedler, Wendelin (University of Paderborn); Vanberg, Christoph (Alfred-Weber-Institut für Wirtschaftswissenschaften, Universität Heidelberg)
    Abstract: Anecdotal, empirical, and experimental evidence suggests that offering extrinsic rewards for certain activities can reduce people's willingness to engage in those activities voluntarily. We propose a simple rationale for this 'crowding out' phenomenon, using standard economic arguments. The central idea is that the potential to earn rewards in return for an activity may create incentives to play 'hard to get' in an effort to increase those rewards. We discuss two specific contexts in which such incentives arise. In the first, refraining from the activity causes others to attach higher value to it because it becomes scarce. In the second, restraint serves to conceal the actor's intrinsic motivation. In both cases, not engaging in the activity causes others to offer larger rewards. Our theory yields the testable prediction that such effects are likely to occur when a motivated actor enjoys a sufficient degree of 'market power.'
    Keywords: intrinsic motivation, crowding out, behavioral economics, market power, hidden information
    JEL: D1 M5 D8 D4 C9
    Date: 2014–04
  8. By: Bahaji, Hamza
    Abstract: This research provides an alternative framework for the analysis of employee stock option exercise patterns. It develops a binomial model where the exercise decision obeys to a policy that maximizes the expected utility to a representative employee exhibiting preferences as described by the Cumulative Prospect Theory (CPT). Using a large database on exercise transactions in 12 US public corporations, I examined the performance of the model in predicting actual exercise patterns. Interestingly, the probability weighting coefficients yielded by the model calibration are consistent with those from the experimental literature. Further, the results suggest that the model outperforms the Expected Utility Theory-based model in predicting actual exercise decisions in the sample. These findings convey the main contribution of this paper: the strong ability of the CPT framework to explain employees exercise behavior. It therefore provides rationale for using this framework in order to get more relevant fair value estimates of stock options.
    Keywords: Stock options; Exercise behavior; Cumulative Prospect Theory; Fair value; Option valuation;
    JEL: G13 G30 J33 M41
    Date: 2014–03
  9. By: Irina I. Krasnopolskaya (National Research University Higher School of Economics)
    Abstract: This paper is devoted to identifying and analyzing the role of corporate volunteering in functioning as the infrastructure of volunteer activity in Russia and the influence of employee civil engagement. Four main functions of third-sector infrastructure are used in this article: motivation and mobilization, organization and support of civil activity, education and socialization, representation and interests protection, as well as net construction and communications. The theoretical background of the research methods lie in the institutional treatment of corporate social responsibility. The role of corporate volunteering in employee civic engagement based on a comparison of the employees who participate in volunteering events and those who do not is examined in detail. Based on the results of binary logistic regression analysis, we conclude that employee participation in corporate volunteering positively influences their civil engagement outside the corporation and satisfaction with various aspects of one’s life. Corporate volunteers (n = 399) are statistically more likely to report civil engagement and personal happiness and satisfaction than employees who do not take part in corporate volunteering events (n=402). Corporate volunteering is positively related with current and future civil engagement, including monetary donations.
    Keywords: corporate social responsibility; corporate volunteering; volunteering infrastructure; civic participation.
    JEL: Z13
    Date: 2014
  10. By: Ulbricht, Robert
    Abstract: The paper studies a model of delegated search. The distribution of search revenues is unknown to the principal and has to be elicited from the agent in order to design the optimal search policy. At the same time, the search process is unobservable, requiring search to be self-enforcing. The two information asymmetries are mutually enforcing each other; if one is relaxed, delegated search is efficient. With both asymmetries prevailing simultaneously, search is almost surely inefficient (it is stopped too early). Second-best remuneration is shown to optimally utilize a menu of simple bonus contracts. In contrast to standard adverse selection problems, indirect nonlinear tarifs are strictly dominated.
    Keywords: adverse selection, bonus contracts, delegated search, moral hazard, optimal stopping.
    JEL: C72 D82 D83 D86
    Date: 2014–03–11

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