nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2014‒08‒28
fourteen papers chosen by
Tommaso Reggiani
Universität zu Köln

  1. Human Assets Index Retrospective series: 2013 update By Michaël GOUJON; Mathilde CLOSSET; Sosso FEINDOUNO
  2. Dynamic Incentive Effects of Heterogeneity in Multi-Stage Promotion Contests By Stracke, Rudi; Sunde, Uwe
  3. Managerial compensation, regulation and risk in banks: theory and evidence from the financial crisis By Vittoria Cerasi; Tommaso Oliviero
  4. "Phantom of the Opera" or "Sex and the City"? Historical Amenities as Sources of Exogenous Variation By Bauer, Thomas K.; Breidenbach, Philipp; Schmidt, Christoph M.
  5. Professors in the boardroom and their impact on corporate governance and firm performance By Francis, Bill B.; Hasan, Iftekhar; Wu, Qiang
  6. Incentives, Wages, Employment, and the Division of Labor in Teams By Michael T. Rauh
  7. Team Performance in a Fractious Culture By Wayne, George; Darrel, Percy
  8. Increasing Organizational Performance through Diversity and Organizational Climate Initiatives: What works, what doesn't (Japanese) By TANIGUCHI Mami
  9. The Latin American Efficiency Gap By Francesco Caselli
  10. Changing Norms about Gender Inequality in Education: Evidence from Bangladesh By Blunch, Niels-Hugo; Das, Maitreyi Bordia
  11. Locus of Control and Its Intergenerational Implications for Early Childhood Skill formation By Francesca Cornaglia; Warn N. Lekfuangfu; Nattavudh Powdthavee; Nele Warrinnier
  12. Not So Dissatisfied After All? The Impact of Union Coverage on Job Satisfaction By Dr Alex Bryson
  13. Rhetorical impression management in corporate narratives and institutional environment By YAN, Beibei; AERTS, Walter
  14. Corruption in PPPs, Incentives and Contract Incompleteness By Elisabetta Iossa; David Martimort

  1. By: Michaël GOUJON (University of Auvergne); Mathilde CLOSSET (FERDI); Sosso FEINDOUNO (Ferdi)
    Abstract: Human capital, a broad concept including education and health, plays a central role in economic development and human well-being.  As a consequence, low human capital became one of the three criteria used by the United Nations Committee for Development Policy (UN-CDP) for identifying Least Developed Countries (LDCs). Since 1991, the UN-CDP has used a composite index to measure human capital at the country level. In 2003 this index was reshaped and was renamed the Human Assets Index (HAI) (see UN-CDP webpage on LDCs, and Guillaumont, 2009).
    JEL: I31 I32
    Date: 2014–07
  2. By: Stracke, Rudi (University of Munich); Sunde, Uwe (University of Munich)
    Abstract: This paper shows that the incentive effects of heterogeneity may be positive rather than negative in dynamic contests with multiple stages. In particular, the well-studied adverse effects of heterogeneity in static interactions are compensated by positive continuation-value and selection effects. Due to these positive dynamic incentive effects of heterogeneity that increase the incentives of relatively more able workers, heterogeneity is unlikely to be as detrimental as commonly perceived for incentives in organizations with multiple hierarchy levels. Heterogeneity of the workforce may even be optimal from the perspective of a firm that provides incentives using a multi-stage promotion contest.
    Keywords: incentive provision, multiple-stages, promotion contest, heterogeneity
    JEL: M52 J33
    Date: 2014–08
  3. By: Vittoria Cerasi; Tommaso Oliviero
    Abstract: This paper analyzes the relation between CEOs monetary incentives, financial regulation and risk in banks. We present a model where banks lend to opaque entrepreneurial projects to be monitored by managers; managers are remunerated according to a pay-for-performance scheme and their effort is unobservable to depositors and shareholders. Within a prudential regulatory framework that defines a capital requirement and a deposit insurance, we study the effect of increasing the variable component of managerial compensation on risk taking. We then test empirically how monetary incentives provided to CEOs in 2006 affected banks’ stock price and volatility during the 2007-2008 financial crisis on a sample of large banks around the World. The cross-country dimension of our sample allows us to study the interaction between CEO incentives and financial regulation. The empirical analysis suggests that the sensitivity of CEOs equity portfolios to stock prices and volatility has been indeed related to worse performance in countries with explicit deposit insurance and weaker monitoring by shareholders. This evidence is coherent with the main prediction of the model, that is, the variable part of the managerial compensation, combined with weak insiders’ monitoring, exacerbates the risk-shifting attitude by managers.
    Keywords: managerial compensation, risk taking, financial regulation, monitoring
    JEL: G21 G38
    Date: 2014–07
  4. By: Bauer, Thomas K. (RWI); Breidenbach, Philipp (RWI); Schmidt, Christoph M. (RWI)
    Abstract: Using the location of baroque opera houses as a natural experiment, Falck et al. (2011) claim to document a positive causal effect of the supply of cultural goods on today's regional distribution of talents. This paper raises serious doubts on the validity of the identification strategy underlying these estimates, though. While we are able to replicate the original results, we proceed to show that the same empirical strategy also assigns positive causal effects to the location of historical brothels and breweries. These estimated effects are similar in size and significance to those of historical opera houses. We document that all these estimates reflect the importance of institutions for long-run economic growth, and that the effect of historical amenities on the contemporary local share of high skilled workers disappears upon controlling for regions' historical importance.
    Keywords: human capital, historical amenities, regional competiveness
    JEL: R11 H42 J24
    Date: 2014–08
  5. By: Francis, Bill B. (Lally School of Management, Rensselaer Polytechnic Institute); Hasan, Iftekhar (Fordham University and Bank of Finland); Wu, Qiang (Lally School of Management, Rensselaer Polytechnic Institute)
    Abstract: Directors from academia served on the boards of around 40% of S&P 1,500 firms over the 1998–2011 period. This paper investigates the effects of academic directors on corporate governance and firm performance. We find that companies with directors from academia are associated with higher performance and this relation is driven by professors without administrative jobs. We also find that academic directors play an important governance role through their advising and monitoring functions. Specifically, our results show that the presence of academic directors is associated with higher acquisition performance, higher number of patents and citations, higher stock price informativeness, lower discretionary accruals, lower CEO compensation, and higher CEO forced turnover-performance sensitivity. Overall, our results provide supportive evidence that academic directors are valuable advisors and effective monitors and that, in general, firms benefit from having academic directors.
    Keywords: academic directors; professors; firm performance; advising; monitoring
    JEL: G30 G34 M41
    Date: 2014–07–09
  6. By: Michael T. Rauh (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)
    Abstract: We develop a theory of incentives, wages, and employment in the context of team production. A central insight is that specialization and division of labor not only improve productivity but also increase eort and the sensitivity of eort to incentives under moral hazard. We show that incentives and employment are complements for the principal when the positive eects of specialization and division of labor outweigh the negative eects of increased idiosyncratic risk and are substitutes otherwise. We provide new characterizations of the partnership, the rm, and the role of the budget-breaker that are quite dierent from the classical literature.
    Keywords: budget-breaker, division of labor, employment, endogenous team size, incentives, partnerships, size-wage dierential, specialization, teams, wages
    JEL: D02 D21 D86 L25 M5
    Date: 2013–08
  7. By: Wayne, George; Darrel, Percy
    Abstract: This research paper is an attempt to study the items which are important in the team performance. Team performance is affected by different variables of cross cultural teams. So the researchers have try to find out that how much team performance rely on the factors of cross cultural teams like Language, Perception, Power and Behavior. The study employs the survey questionnaires in gathering information from the respondents on significant items of cross cultural teams. Simple random sampling technique was applied on the homogenous population and identified sample respondent from larger pool of respondents. Logistic regression (optimal scaling) was applied on the data set. Managerial implication can be that organization should make Team in which members having similar language. Member having positive behavior among themselves in the team; Teams can do wonders. Lastly, delegation of power or authority has significant impact. If teams have significant power to do whatever they want to do and how to do it, then they feel relax and motivated to achieve targets. The result empirically proves that Language, behavior, power and perception all the variables play a significant role in team performance.
    Keywords: Cross Cultural Teams, Language, Perception, Behavior, Leadership and Power
    JEL: M12
    Date: 2013–11–23
  8. By: TANIGUCHI Mami
    Abstract: Globalization of business leads to environmental uncertainty for corporate organizations. To establish competitive advantage, organizations need continuous introduction of new products and services to markets and quick implementation of new strategies. This paper shows what kinds of initiatives are required for companies to leverage a diverse workforce. Study 1 explores diversity initiatives that are effective in terms of innovativeness by dividing companies into three groups based on gender diversity in management and gender diversity in non-management. Companies that are high in gender diversity in management, diversity awareness training, network group support, and mentoring programs are effective in terms of innovativeness. In contrast, in companies that are low in gender diversity, a participative decision making climate improves innovativeness. Study 2 explores how the chief executive officer's (CEO) leadership style and commitment and initiatives to change employees' mindset influence climate formation. Transformational Leadership is effective for climate formation regardless of gender diversity in both management and non-management. The CEO's commitment and initiatives to change employees' mindset aren't effective in companies with high gender diversity in management. This may be due to backlash by male employees. Study 3 shows that Transformational Leadership influences inclusive initiatives and participative decision-making climate while top management teams' fault lines detract from Transformational Leaderships' impact on diversity initiatives and climate. Weakened fault lines (of age, external working experience, educational background and knowledge) are essential to maintain transformational leadership influences.
    Date: 2014–08
  9. By: Francesco Caselli
    Abstract: The average Latin American country produces about 1 fifth of the output per worker of the US. What are the sources of these enormous income gaps? I report development-accounting results for Latin America. On average Latin America's overall physical and human capital endowment relative to the USA is essentially identical to Latin America's efficiency relative to the USA . In my main sample average relative capital and average relative efficiency are both roughly double actual average relative incomes. Hence, both capital gaps and efficiency gaps are very large: the average Latin American country has less than half the capital (human and physical) per worker of the US, and uses it less than half as efficiently. In assessing this evidence, it is essential to bear in mind that efficiency gaps contribute to income disparity both directly -- as they mean that Latin America gets less out of its capital -- and indirectly -- since much of the capital gap itself is likely due to diminished incentives to invest in equipment, structure, schooling, and health caused by low efficiency. The consequences of closing the efficiency gap would correspondingly be far reaching. Explaining the Latin American efficiency gap is therefore a high priority both for scholars and for policy makers.
    Keywords: Latin America, income gaps, development accounting
    JEL: O11
    Date: 2014–08
  10. By: Blunch, Niels-Hugo (Washington and Lee University); Das, Maitreyi Bordia (World Bank)
    Abstract: This paper examines norms about gender equality of the education of children and adults in Bangladesh using a recent household survey for two cohorts of married women. Education norms are found to differ substantially across cohorts, with women from the younger cohort being far more positive about female vs. male education of both children and adults. The effect of education in determining norms spans own and spousal education, as well as that of older educated females in the household, thus indicating sharing of education norms both within marriage and across generations. Detailed decompositions reveal that more than anything else it is the improvement in education across cohorts that has been driving the narrowing of the generational education norms gap in Bangladesh in recent years.
    Keywords: gender education inequality norms, human capital, decomposition analysis, Bangladesh
    JEL: D19 I29 J12 J16 J24
    Date: 2014–08
  11. By: Francesca Cornaglia; Warn N. Lekfuangfu; Nattavudh Powdthavee; Nele Warrinnier
    Abstract: We propose a model in which parents have a subjective belief about the impact of their investment on the early skill formation of their children. This subjective belief is determined in part by locus of control (LOC), i.e., the extent to which individuals believe that their actions can influence future outcomes. Using a unique British cohort survey, we show that maternal LOC measured during the 1st-trimester strongly predicts early and late child cognitive and noncognitive outcomes. Further, we utilize the variation in maternal LOC to improve the specification typically used in the estimation of parental investment effects on child development.
    Keywords: Locus of control, parental investment, human capital accumulation, early skill formation, ALSPAC
    JEL: J01 I31
    Date: 2014–08
  12. By: Dr Alex Bryson
    Abstract: The links between unionisation and job satisfaction remain controversial. In keeping with the existing literature we find strong statistically significant negative correlations between unionisation and overall job satisfaction. However, in contrast to the previous literature we find that once one accounts for fixed unobservable differences between covered and uncovered employees, union coverage is positively and significantly associated with satisfaction with pay and hours of work.� Failure to account for fixed unobservable differences between covered and uncovered employees leads to a systematic underestimate of the positive effects of coverage on job satisfaction for both union members and non-members.� It seems union coverage has a positive impact on job satisfaction that is plausibly causal.�
    Date: 2013–09
  13. By: YAN, Beibei; AERTS, Walter
    Abstract: We study rhetorical impression management in the letter to shareholders using linguistic style properties of text and investigate whether the company’s institutional environment affects the rhetorical style of the CEO in the shareholder letter. The effect of the institutional environment is examined by comparing linguistic style of US and UK companies in a longitudinal setting. We use automated text analysis procedures to capture linguistic style characteristics and discern three distinct linguistic style profiles with rhetorical effect: an acclaiming or assertive stance, a more defensive framing position and a logic-based cognitive impression management orientation. Consistent with our expectations of higher intrinsic incentives for rhetorical impression management in the US, we find that, after controlling for company-specific determinants, all three composite linguistic style profiles show to be significantly more prominent in US companies than in UK companies. Our results further show that credibility concerns and litigation risk affect the rhetorical style of the shareholder letter in the US where higher institutional scrutiny tends to sharpen sensitivity to credibility issues and litigation risk.
    Keywords: Letter to shareholder, Linguistic property, Rhetorical style, Institutional scrutiny, Credibility, Litigation risk
    Date: 2014–07
  14. By: Elisabetta Iossa (Faculty of Economics, University of Rome "Tor Vergata"); David Martimort (Paris School of Economics-EHESS)
    Abstract: In a public procurement setting, we discuss the desirability of completing contracts with state-contingent clauses providing for monetary compensations to the contractor when revenue shocks occur. Realized shocks are private information of the contractor and this creates agency costs of delegated service provision. Verifying the contractor’s messages on the shocks entails contracting costs that make incomplete contracts attractive, despite their higher agency costs. A public official (supervisor) has private information on contracting costs and chooses the degree of contractual incompleteness on behalf of an upper-tier public authority. As the public official may be biased towards the contractor, delegating the contractual choice to that lower-tier may result in incomplete contracts being chosen too often. Empirical predictions on the use of incomplete contracts and policy implications on the benefits of standardized contract terms are discussed.
    Keywords: Corruption, Incomplete Contracts, Moral Hazard, Principal-Agent-Supervisor Model, Public-Private Partnerships, Risk Allocation
    JEL: D23 D82 K42 L33
    Date: 2014–07–18

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