nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2014‒08‒09
eleven papers chosen by
Tommaso Reggiani
Universität zu Köln

  1. Performance Appraisals and Job Satisfaction By Patrick Kampkötter
  2. Status and incentives: A critical survey By Dey, Oindrila; Banerjee, Swapnendu
  3. Management incentives under formula apportionment: Tax-induced distortions of effort and compensation in a principal-agent setting By Martini, Jan-Thomas; Niemann, Rainer; Simons, Dirk
  4. Executive compensation structure and credit spreads By Colonnello, Stefano; Curatola, Giuliano; Ngoc Giang Hoang
  5. Human Capital Outflow and Economic Misery:Fresh Evidence for Pakistan By Ali, Amjad; Mujahid, Noreen; Rashid, Yahya; Shahbaz, Muhammad
  6. A Human Capital Theory of Growth: New Evidence for an Old Idea By Theodore R. Breton
  7. Transferability of Human Capital and Immigrant Assimilation: An Analysis for Germany By Leilanie Basilio. Thomas K. Bauer; Anica Kramer
  8. Human Knowledge and a Commonsensical Measure of Human Capital: A Proposal By Amavilah, Voxi Heinrich
  9. Financial incentives and loan officer behavior: Multitasking and allocation of effort under an incomplete contract By Behr, Patrick; Drexler, Alejandro; Gropp, Reint; Guettler, Andre
  10. Optimal taxation and debt with uninsurable risks to human capital accumulation By Piero Gottardi; Atsushi Kajii; Tomoyuki Nakajima
  11. Why Are Black-Owned Businesses Less Successful than White-Owned Businesses?  The Role of Families, Inheritances, and Business Human Capital By Fairlie, Robert

  1. By: Patrick Kampkötter
    Abstract: Formal performance appraisals (PA) are one of the most important human resource management practices in companies. In this paper, we focus on the reaction of employees to these performance assessments. In particular, we investigate the effect between the incidence of being formally evaluated by a supervisor and job and income satisfaction. Building on a representative, longitudinal sample of more than 12,000 individuals from the German Socio-Economic Panel Study (SOEP), we apply fixed effects regressions and find a significantly positive effect of PA on job satisfaction, which is driven by appraisals that are linked to monetary outcomes. Furthermore, the moderating effects of personality traits (Big Five, locus of control) on the relationship between PA and job satisfaction are explored. We find a negative interaction term between PA without any monetary consequences and both employees scoring high on openness to experience and internal locus of control. This suggests that for these employees appraisals, which induce performance monitoring without any monetary consequences, have a detrimental effect on job satisfaction rates.
    Keywords: Performance Appraisal; Job Satisfaction; Income Satisfaction; Big Five; Locus of Control; SOEP
    Date: 2014
  2. By: Dey, Oindrila; Banerjee, Swapnendu
    Abstract: This paper aims to provide a survey on the studies on incentive, especially non-monetary incentive like status. We intend to summarize the different studies in a concise manner and comment on the divergent views on valuation for status, relation between monetary and status incentives, the technique of modeling status and on the cost of introducing status. We also underline the some probable adverse consequences associated with the use of status incentive. In this paper it also highlights the problem associated with asymmetric information in the labour market, specifically, the (post contractual) moral hazard problem.
    Keywords: Status, incentives, principal–agent problem
    JEL: L1
    Date: 2014–07–30
  3. By: Martini, Jan-Thomas; Niemann, Rainer; Simons, Dirk
    Abstract: The introduction of a common consolidated corporate tax base (CCCTB) and tax allocation via formula apportionment (FA) is hotly debated in the European Union (EU) since more than a decade. While the literature has thoroughly analyzed the economic effects of FA from a macro-level perspective, the firm view has been added only recently. Within this micro-level framework discussing possible tax-induced distortions of multi-jurisdictional entities' (MJE) decisions becomes feasible. Anticipating the reactions of MJEs to the introduction of FA requires considering delegation and incentivisation, because management decisions are influenced by principal agent relationships. How FA affects the demand for managerial effort is a hitherto neglected research question. Accordingly, the objective of this paper is to highlight the tax-induced distortions of managerial incentives caused by FA. For this purpose we set up a LEN-type principal-agent model with agents in two different jurisdictions. Compared to the case with separate taxation (ST) the principal demands increased effort and pays an increased compensation to managers in low-tax jurisdictions, if payroll enters the FA formula. Managers in high-tax jurisdictions face the opposite effect. Further, the composition of the compensation packages changes. Overall, net profit increases, because FA offers potential for profit shifting. --
    Keywords: Common Consolidated Corporate Tax Base,Formula Apportionment,Managerial Compensation,Multi-Jurisdictional Entities,Principal-Agent-Problem
    JEL: H25 M41
    Date: 2014
  4. By: Colonnello, Stefano; Curatola, Giuliano; Ngoc Giang Hoang
    Abstract: We develop a model of managerial compensation structure and asset risk choice. The model provides predictions about how inside debt features affect the relation between credit spreads and compensation components. First, inside debt reduces credit spreads only if it is unsecured. Second, inside debt exerts important indirect effects on the role of equity incentives: When inside debt is large and unsecured, equity incentives increase credit spreads; When inside debt is small or secured, this effect is weakened or reversed. We test our model on a sample of U.S. public firms with traded CDS contracts, finding evidence supportive of our predictions. To alleviate endogeneity concerns, we also show that our results are robust to using an instrumental variable approach. --
    Keywords: Compensation Structure,Credit Spread,Risk-Taking,Inside Debt,Business Cycle
    JEL: G32 G34 J32 J33 M52
    Date: 2014
  5. By: Ali, Amjad; Mujahid, Noreen; Rashid, Yahya; Shahbaz, Muhammad
    Abstract: This paper visits the impact of economic misery on human capital outflow using time series data over the period of 1975-2012. We have applied the combined cointegration tests and innovative accounting approach to examine long run and causal relationship between the variables. Our results affirm the presence of cointegration between the variables. We find that economic misery increases human capital outflow. Foreign remittances add in human capital outflow from Pakistan. The migration from Pakistan to rest of world is boosted by depreciation in local currency. Income inequality is also a major contributor to human capital outflow. The present study is comprehensive effort and may provide new insights to policy makers for handling the issue of human capital outflow by controlling economic misery in Pakistan.
    Keywords: Economic misery, human capital outflow, Pakistan
    JEL: C0
    Date: 2014–07–27
  6. By: Theodore R. Breton
    Abstract: In 1960 Theodore Schultz expounded a human capital theory of economic growth that includes three elements: 1) Countries without much human capital cannot manage physical capital effectively, 2) Economic growth can only proceed if physical capital and human capital rise together, and 3) Human capital is the factor most likely to limit growth. I specify Schultz’s theory mathematically and test it in periods when global financial capital was highly mobile. I find that in 1870, 1910, and 2000, the average schooling attainment of the adult population largely determined the stock of physical capital/capita and GDP/capita in 42 market economies.
    Keywords: Human Capital, Schooling, Capital Investment, Economic Growth, Solow Model, Market Economies
    JEL: E13 I21 O11 O15 O41
    Date: 2014–01–01
  7. By: Leilanie Basilio. Thomas K. Bauer; Anica Kramer
    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 in particular labor market experience accumulated in the home countries of the immigrants receive signifiantly lower returns than human capital obtained in Germany. We further find evidence for heterogeneity in the returns to human capital of immigrants across countries. Finally, imperfect human capital transferability appears to be a major factor in explaining the wage differential between natives and immigrants.
    Keywords: Human Capital, Rate of Return, Immigration, Assimilation
    JEL: J61 J31 J24
    Date: 2014
  8. By: Amavilah, Voxi Heinrich
    Abstract: Existing literature demonstrates clearly that knowledge is the sum of common knowledge and uncommon knowledge. Common knowledge is mostly inherited and it may or may not have scientific bases. Uncommon knowledge is mainly a product of the motions of science and technology. Scientific and technological motions depend on human capital, so that world knowledge is human capital by implication. From here analysis is not so unusual as the concept of human capital is not new. Through out history people have been interested in valuing human life. What prevented rapid progress in the beginning was inhibitions to likening humans to machines. As soon as economists overcame their inhibitions, human capital theory developed quickly along the familiar logistic curve, picking up speed after Mincer devised a practical formula for it. However, the Mincerian equation formalized a misconception in three ways. First, it based human capital only on labor, thereby overstating the production role and disregarding the importance of human capital in innovation and knowledge creation. Second, it measured human capital as an area, ignoring common language and understanding that as knowledge human capital is at least 3D “solid”, with depth, width, and the time over and in which it accumulates. Finally, it neglected key interactions between the quantity and quality indicators of human capital. These misconceptions are what this paper tries to shed light upon by proposing a commonsensical measure of human capital as a volume. Analysis finds that disregarding interactions our commonsensical measure of human capital is larger than conventional Mincerian measures of human capital. Taking interactions into account, it is possible for our measure to be larger, smaller, or equal to conventional measures.
    Keywords: 3D human capital, Mincerian human capital, scientific knowledge, technological knowledge, common knowledge, wide knowledge, deep knowledge, solid knowledge, intimate knowledge, acquired knowledge, inherited knowledge
    JEL: D83 I29 J24 O15 Z00
    Date: 2014–07–30
  9. By: Behr, Patrick; Drexler, Alejandro; Gropp, Reint; Guettler, Andre
    Abstract: In this paper we investigate the implications of providing loan officers with a compensation structure that rewards loan volume and penalizes poor performance versus a fixed wage unrelated to performance. We study detailed transaction information for more than 45,000 loans issued by 240 loan officers of a large commercial bank in Europe. We examine the three main activities that loan officers perform: monitoring, originating, and screening. We find that when the performance of their portfolio deteriorates, loan officers increase their effort to monitor existing borrowers, reduce loan origination, and approve a higher fraction of loan applications. These loans, however, are of above-average quality. Consistent with the theoretical literature on multitasking in incomplete contracts, we show that loan officers neglect activities that are not directly rewarded under the contract, but are in the interest of the bank. In addition, while the response by loan officers constitutes a rational response to a time allocation problem, their reaction to incentives appears myopic in other dimensions. --
    Keywords: loan officer,incentives,monitoring,screening,loan origination
    JEL: G21 J33
    Date: 2014
  10. By: Piero Gottardi; Atsushi Kajii; Tomoyuki Nakajima
    Abstract: We consider an economy where individuals face uninsurable risks to their human capital accumulation, and study the problem of determining the optimal level of linear taxes on capital and labor income together with the optimal path of the debt level. We show both analytically and numerically that in the presence of such risks it is bene cial to tax both labor and capital income and to have positive government debt.
    Date: 2014–06
  11. By: Fairlie, Robert
    Abstract: Using confidential microdata from the Characteristics of Business Owners, we examine why African-American owned businesses lag substantially behind white-owned businesses in sales, profits, employment, and survival.  Black business owners are much less likely than white owners to have had a self-employed family member owner prior to starting their business and are less likely to have worked in that family member's business.  Using a nonlinear decomposition technique, we find that the lack of prior work experience in a family business among black business owners, perhaps by limiting their acquisition of general and specific business human capital, negatively affects black business outcomes.
    Keywords: Business, entrepreneurship, black business, human capital, business human capital, inequality, race
    Date: 2014–08–06

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.