nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2014‒06‒28
nine papers chosen by
Tommaso Reggiani
University of Cologne

  1. Stock-based Compensation Plans and Employee Incentives By Jan Zabojnik
  2. Working time autonomy and time adequacy: What if performance is all that counts? By Lott, Yvonne
  3. Paying for risk: Bankers, compensation, and competition By Sepe, Simone M.; Whitehead, Charles K.
  4. Estimating Human Capital Externalities: The Case of the Spanish Provinces, 1995-2010. By Manuel Hidalgo-Pérez; Walter García-Fontes
  5. Gender differences in sorting By Merlino L.P.; Parrotta P.; Pozzoli D.
  6. Workforce ageing and the training propensity of Italian firms: cross-sectional evidence from the INDACO survey By Guerrazzi, Marco
  7. Ode to the sea: Workplace Organizations and Norms of Cooperation By Uri Gneezy; Andreas Leibbrandt; John A. List
  8. Finding good managers: an econometric case study of a large Japanese auto dealership By Hideo Owan; Shingo Takahashi; Tsuyoshi Tsuru; Katsuhito Uehara
  9. Incentive payments, food safety and moral hazard in the supply chain By Fraser, Rob; Hussein, Mohamud

  1. By: Jan Zabojnik (Queen's University)
    Abstract: Standard principal-agent theory predicts that large firms should not use employee stock options and other stock-based compensation to provide incentives to non-executive employees. Yet, business practitioners appear to believe that stock-based compensation improves incentives, and mounting empirical evidence points to the same conclusion. This paper provides an explanation for why stock-based incentives can be effective. In the model of this paper, employee stock options complement individual measures of performance in inducing employees to invest in firm-specific knowledge. In some situations, a contract that only consists of options is more efficient than a contract based solely on individual performance.
    Keywords: Stock-based Compensation, Employee Stock Options, Optimal Incentive Contracts, Firm-specific Knowledge
    JEL: D86 J33 M52
    Date: 2014–06
  2. By: Lott, Yvonne
    Abstract: To be able to combine work with activities and duties outside the workplace successfully, employees need time adequacy. Time adequacy is the fit between working time and all other time demands and can be achieved through working time flexibility and autonomy. However, past research has shown that working time flexibility and autonomy do not necessarily foster employees' time sovereignty. Studies suggest that the benefits of working time arrangements depend on work organization. Analyzing performance-related pay, target setting and self-directed teamwork as moderators for working time arrangements and time adequacy is therefore the main interest of the study. The data used is taken from the European Survey of Working Conditions in 2010. Multi-level analyses show that working time flexibility and autonomy, as well as self-directed teamwork, are positively associated with time adequacy. However, employees experience time squeeze with performance-related pay and target setting. Moreover, performance-related pay undermines the positive effect of working time autonomy. The study indicates that management practices have distinct connotations for time adequacy. Moreover, wage flexibility limits employees' benefits from working time autonomy. --
    Date: 2014
  3. By: Sepe, Simone M.; Whitehead, Charles K.
    Abstract: Efforts to control bank risk address the wrong problem in the wrong way. They presume that the financial crisis was caused by CEOs who failed to supervise risk-taking employees. The responses focus on executive pay, believing that executives will bring non-executives into line - using incentives to manage risk-taking - once their own pay is regulated. What they overlook is the effect on non-executive pay of the competition for talent. Even if executive pay is regulated, and executives act in the bank's best interests, they will still be trapped into providing incentives that encourage risk-taking by non-executives due to the negative externality that arises from that competition. Greater risk-taking can increase short-term profits and, in turn, the amount a non-executive receives, potentially at the expense of long-term bank value. Non-executives, therefore, have an incentive to incur significant risk upfront so long as they can depart for a new employer before any losses materialize. The result is an upward spiral in compensation - reducing an executive's ability to set non-executive pay and the ability of any one bank to adjust compensation to reflect risk-taking and long-term outcomes. New regulation must address the tension between compensation and competition. Regulators should take account of the effect of competition on market-wide levels of pay, including by non-banks who compete for talent. The ability of non-executives to jump from a bank employer to another financial firm should also be limited. In addition, banks should be required to include a long-term equity component in non-executive pay, with subsequent employers being restricted from compensating a new employee for any losses she incurs related to her prior work. --
    Date: 2014
  4. By: Manuel Hidalgo-Pérez (Department of Economics, Universidad Pablo de Olavide de Sevilla); Walter García-Fontes (Department of Economics, Universitat Pompeu Fabra and Barcelona Graduate School of Economics)
    Abstract: We estimate the strength of schooling externalities for Spanish provinces over the 1995-2010 period. Our empirical work employs both main approaches available in the literature, the Constant Composition Approach and the Mincerian Approach. Using data from the Continuous Sample of Working Records and change in province human capital stock we find that both methodologies yield significant externalities.
    Keywords: externalities, human capital, Spanish provinces
    JEL: I21 J31 O47
    Date: 2014–06
  5. By: Merlino L.P.; Parrotta P.; Pozzoli D. (GSBE)
    Abstract: In this paper, we investigate the sorting of workers in firms to understand gender gaps in labor market outcomes. Using Danish employer-employee matched data, we find strong evidence of glass ceilings in certain firms, especially after motherhood, preventing women from climbing the career ladder and causing the most productive female workers to seek better jobs in more female-friendly firms in which they can pursue small career advancements. Nonetheless, gender differences in promotion persist and are found to be similar in all firms when we focus on large career advancements. These results provide evidence of the sticky floor hypothesis, which, together with the costs associated with changing employer, generates persistent gender gaps.
    Keywords: Economics of Gender; Non-labor Discrimination; Human Capital; Skills; Occupational Choice; Labor Productivity; Job, Occupational, and Intergenerational Mobility; Promotion;
    JEL: J16 J24 J62
    Date: 2014
  6. By: Guerrazzi, Marco
    Abstract: In this paper, I provide a probit analysis in which the propensity of private Italian firms to offer on-the-job training is linked to the age and the gender of the employed workforce as well as to a set of relevant corporate characteristics such as size, sector, geographical location, innovation strategies, R&D investments and the use of social safety valves. Retrieving cross-sectional data from INDACO 2009, I find that the propensity of surveyed firms towards training provision follows an inverted u-shaped pattern with respect to the average age of incumbent workers. Furthermore, I show that larger firms are more willing to offer training and the same attitude holds for productive units that adopted innovation strategies and/or invested in R&D projects. By contrast, I find that the propensity to support training activities is negatively correlated to the percentage of employed women and the use of social valves.
    Keywords: Ageing; Older workers; Vocational training; Human capital; Labour turnover; Probit model; INDACO.
    JEL: J14 J24
    Date: 2014–06–20
  7. By: Uri Gneezy; Andreas Leibbrandt; John A. List
    Abstract: The functioning and well-being of any society and organization critically hinges on norms of cooperation that regulate social activities. Empirical evidence on how such norms emerge and in which environments they thrive remains a clear void in the literature. To provide an initial set of insights, we overlay a set of field experiments in a natural setting. Our approach is to compare behavior in Brazilian fishermen societies that differ along one major dimension: the workplace organization. In one society (located by the sea) fishermen are forced to work in groups whereas in the adjacent society (located on a lake) fishing is inherently an individual activity. We report sharp evidence that the sea fishermen trust and cooperate more and have greater ability to coordinate group actions than their lake fishermen counterparts. These findings are consistent with the argument that people internalize social norms that emerge from specific needs and support the idea that socio-ecological factors play a decisive role in the proliferation of pro-social behaviors.
    JEL: C93 J0
    Date: 2014–06
  8. By: Hideo Owan (Institute of Social Science, The University of Tokyo); Shingo Takahashi (International University of University); Tsuyoshi Tsuru (Institute of Economic Research, Hitotsubashi University); Katsuhito Uehara (Faculty of Human Studies, Tenri University)
    Abstract: Using the personnel and transaction data from a large auto dealership in Japan, this paper discusses the value, incentives, assignments, determinants of performance, and learning of managers. We find that: (1) moving one standard deviation up the distribution of manager fixed effects raises a branch's profit by 9.3%; (2) the relationship between managers' branch assignments and their performance is more consistent with tournament theory rather than screening or learning mechanism; (3) better managers are systematically selected to run less profitable branches; and (4) managers with smaller age difference with subordinates and broader experience tend to perform better.
    Date: 2014–06
  9. By: Fraser, Rob; Hussein, Mohamud
    Abstract: This paper analyses an incentive payment-based approach to improving food safety in the supply chain. It develops a principal-agent model of the food supply chain in which the principal offers heterogeneous agents a payment to implement costly additional practices to improve food safety. It is shown that the presence or absence of the moral hazard problem affects the balance of benefits and costs from broadening the scope of the system from just lower cost larger agents to include higher cost smaller agents, thereby affecting the optimal design of the system. In particular, broadening the scope of the system to include smaller agents by increasing the size of the incentive payment can ameliorate the moral hazard problem among larger agents to the extent that this more costly approach is socially optimal.
    Keywords: incentive payments, moral hazard, food safety, supply chain, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, D82, L51, Q18,
    Date: 2014–04

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