nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2014‒07‒28
ten papers chosen by
Tommaso Reggiani
Universität zu Köln

  1. Employee Recognition and Performance: A Field Experiment By Bradler, Christiane; Dur, Robert; Neckermann, Susanne; Non, Arjan
  2. The Effect of Competition on Managers' Compensation: Evidence From a Quasi-natural Experiment By Ana P. Fernandes; Priscila Ferreira; L. Alan Winters
  3. Finding Good Managers: An Econometric Case Study of a Large Japanese Auto Dealership By Owan, Hideo; Takahashi, Shingo; Tsuru, Tsuyoshi; Uehara, Katsuhito
  4. Mismeasurement in Pay-for-Performance: Evidence from an Intervention to Reduce Health Care Spending in China By Bingxiao Wu
  5. The Wage Returns to On-the-Job Training: Evidence from Matched Employer-Employee Data By Almeida, Rita K.; de Faria, Marta Lince
  6. Great expectations The unintended consequences of educational choices By Francesco Ferrante
  7. Do Personality Traits Affect Productivity? Evidence from the Lab By Cubel, Maria; Nuevo-Chiquero, Ana; Sanchez-Pages, Santiago; Vidal-Fernández, Marian
  8. Workplace Health Promotion and Labour Market Performance of Employees By Huber, Martin; Lechner, Michael; Wunsch, Conny
  9. Skilled Immigrants' Contribution to Productive Efficiency By Nahm, Daehoon; Tani, Massimiliano
  10. Motivate and Select: Relational Contracts with Persistent Types By Radoslawa Nikolowa

  1. By: Bradler, Christiane (ZEW Mannheim); Dur, Robert (Erasmus University Rotterdam); Neckermann, Susanne (Erasmus University Rotterdam); Non, Arjan (ROA, Maastricht University)
    Abstract: This paper reports the results from a controlled field experiment designed to investigate the causal effect of unannounced, 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. Our results are consistent with workers having a preference for conformity and being reciprocal at the same time.
    Keywords: employee motivation, recognition, reciprocity, conformity, field experiment
    JEL: C93 M52
    Date: 2014–07
  2. By: Ana P. Fernandes (University of Exeter); Priscila Ferreira (NIMA, Universidade do Minho); L. Alan Winters (University of Sussex, CEPR, CEP and IZA)
    Abstract: This paper studies the effect of competition on executive compensation. We estimate the effect of increased product market competition on the performance-pay sensitivity of CEOs, and contrast it with the effect for department managers and other workers in the corporation. We use a recent reform that simplied firm entry regulation in Portugal as a quasi-natural experiment. The empirical strategy exploits the staggered implementation of the reform across municipalities. Using linked employer-employee data for the universe of workers and firms, we show that increased product market competition, following the deregulation, decreased the sensitivity of pay to performance of CEOs and other managers, with no significant effects found for other workers. These findings are consistent with existing theoretical results in a principal-agent framework that a fall in entry costs leads to weaker managerial incentives.
    Keywords: Entry, Deregulation, Product Market Competition, Executive Compensation, Performance-related Pay
    JEL: J31 J33 M52
    Date: 2014–07
  3. By: Owan, Hideo; Takahashi, Shingo; Tsuru, Tsuyoshi; Uehara, Katsuhito
    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
  4. By: Bingxiao Wu (Rutgers University)
    Abstract: This paper examines how physicians in China respond to a pay-for-performance scheme that mismeasures performance. In 2005, China imposed a policy that penalizes hospitals with high drug sale percentage in the total revenue, with the intent to decrease drug expenditure. Using a unique patient-level data from a large Chinese hospital, I find that physicians responded not by decreasing drug prescription, but by increasing non-drug services, especially diagnostic tests. There is no significant impact on length of stay. The overall effect was to increase total expenditures. This finding is consistent with the inducement hypothesis as physicians in China may receive under-the-counter commission for prescribing certain drugs. I also find that increased non-drug expenditures were concentrated among insured patients, suggesting that physicians have stronger incentives to act in the patients’ interests than in the interests of the third-party payer.
    Keywords: pay-for-performance, physician incentives, drug prescription, China’s health care system
    JEL: I11 I18 M52
    Date: 2014–06–10
  5. By: Almeida, Rita K. (World Bank); de Faria, Marta Lince (Católica Lisbon)
    Abstract: Skills shortages and skill mismatch are a pressing concern for policymakers in several developing countries, and in East Asia specifically. Providing on-the-job training can be an effective policy tool to shape the skills of the existent workforce to the specific needs of the firms. This paper explores a unique data set of matched employer-employee data for Malaysia and Thailand to estimate the wage return to on-the-job training in these two countries. Exploring propensity score matching estimates, we show that the average wage returns to on-the-job training are 7.7% for Malaysia and 4.5% for Thailand. Furthermore, we find evidence that the wage returns to on-the-job training are higher for males than for females in Malaysia and that, for both countries, returns are higher for workers with at least secondary education.
    Keywords: matched employer-employee data, wages, on-the-job training
    JEL: J24 J30
    Date: 2014–07
  6. By: Francesco Ferrante (University of Cassino, AlmaLaurea)
    Abstract: Human capital is invariably found to be an important explanatory variable of various proxies for well being (WB), i.e. income, happiness, job and life satisfaction, health status. Nevertheless, to date few systematic efforts have been made to explain its various and interconnected functions. The U-shaped age/SWB relation found by many empirical studies suggests that investigating the pattern of different measures of WB over people’s life cycles may yield important information and provide useful insights into the main mechanisms connecting human capital and WB. In this paper I contend that there are four such links. First, human capital improves decision making skills in different life domains. Second, it improves the skills and knowledge in doing things and enjoying life. Third, human capital shapes our identity/personality traits and, fourth, by doing so, it fuels our aspirations in different life domains. The first two effects can be expected to improve people’s performance and subjective well being. Building on Ferrante (2009), more ambiguous is the impact exerted by human capital through the joint action of people’s identity and aspirations. In this paper, I explore data drawn from the Survey on Household Income and Wealth (SHIW) conducted by the Bank of Italy (2008), containing rich information on people’s socioeconomic and educational backgrounds, educational and skill mismatches in the workplace and various measures of WB such as income, happiness, job satisfaction and health status. The tentative explanations for my empirical findings are: (a) people experience large mismatches in aspirations/expectations early in adult life; (d) the latter mismatches depend on education and are largely confined to the labour market; (c) the curvature of the U-shaped age/happiness relationship depends on the level of education. The suggested interpretation of this results is that education affects both people’s expectations and the way in which they react to unfulfilled aspirations.
    Keywords: aspirations, expectations, education, well being
    JEL: A13 D1 D60 H11 I2 J13 J24 I38
    Date: 2014–07
  7. By: Cubel, Maria (University of Barcelona); Nuevo-Chiquero, Ana (University of Sheffield); Sanchez-Pages, Santiago (University of Barcelona); Vidal-Fernández, Marian (University of New South Wales)
    Abstract: While survey data supports a strong relationship between personality and labor market outcomes, the exact mechanisms behind this association remain unexplored. In this paper, we take advantage of a controlled laboratory set-up to test whether this relationship operates through productivity, and isolate this mechanism from other channels such as bargaining ability or self-selection into jobs. Using a gender neutral real-effort task, we analyse the impact of the Big Five personality traits on performance. We find that more neurotic subjects perform worse, and that more conscientious individuals perform better. These findings are in line with previous survey studies and suggest that at least part of the effect of personality on labor market outcomes operates through productivity. In addition, we find evidence that gender and university major affect the impact of the Big Five personality traits on performance.
    Keywords: Big-Five, personality traits, experiment, labour productivity, performance
    JEL: C91 D03 J3 M5
    Date: 2014–07
  8. By: Huber, Martin (University of St. Gallen); Lechner, Michael (University of St. Gallen); Wunsch, Conny (University of Basel)
    Abstract: This paper investigates the average effects of (firm-provided) workplace health promotion measures in form of the analysis of sickness absenteeism and health circles/courses on labour market out-comes of the firms' employees. Exploiting linked employer-employee panel data that consist of rich survey-based and administrative information on firms, workers and regions, we apply a flexible propensity score matching approach that controls for selection on observables as well as on time-constant unobserved factors. While the effects of analysing sickness absenteeism appear to be rather limited, our results suggest that health circles/courses increase tenure and decrease the number of job changes across various age groups. A key finding is that health circles/courses strengthen the labour force attachment of elderly employees (51-60), implying potential cost savings for public transfer schemes such as unemployment or early retirement benefits.
    Keywords: firm health policies, health circles, health courses, analysis of sickness absenteeism, matching
    JEL: I10 I19 J32
    Date: 2014–06
  9. By: Nahm, Daehoon (Macquarie University, Sydney); Tani, Massimiliano (IZA)
    Abstract: This paper studies whether skilled migrants contribute to the host country's 'productive efficiency' (Farrell, 1957) using input-output and immigration sectoral data for seven industries in twelve countries during the period 1999-2001. We find that skilled migrants contribute positively to a country's productive efficiency with the exception of the finance sector. The results broadly support the adoption of skill-biased migration policies.
    Keywords: highly skilled migration, human capital, productive efficiency
    JEL: D24 F2 J6 J24
    Date: 2014–07
  10. By: Radoslawa Nikolowa (Queen Mary University of London)
    Abstract: We develop a model of relational contracts with moral hazard and asymmetric persistent information about an employee's type. We find that the form of the optimal contract depends on the job characteristics as well as the distribution of employees' talent. Bonus contracts are more likely to be adopted in complex jobs and when high talent is not too common or too rare. Firms with 'normal' jobs are more likely to adopt termination contracts. In labor market equilibrium, different contracts may be adopted by ex ante identical firms. Hence, we offer an explanation for the co-existence of different employment systems within the same industry.
    Keywords: Relational contracts, Job characteristics, Employment systems, Labor market segmentation
    JEL: D82 M5 L14
    Date: 2014–07

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.