nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2014‒11‒17
five papers chosen by
Tommaso Reggiani
Universität zu Köln

  1. Employee Stock Purchase Plans - Gift or Incentive? Evidence from a Multinational Corporation By Alex Bryson; Richard B. Freeman
  2. The Role of Managerial Work in Market Performance: A Monopoly Model with Team Production By Hildenbrand, Andreas; Duran, Mihael
  3. Does Relative Grading help Male Students? Evidence from a Field Experiment in the Classroom By Eszter Czibor; Sander Onderstal; Randolph Sloof; Mirjam van Praag
  4. Incentive compensation for risk managers when effort is unobservable By Paul H. Kupiec
  5. The Signaling Role of Note Being Promoted: Theory and Evidence By Jin, Xin

  1. By: Alex Bryson; Richard B. Freeman
    Abstract: Many large listed firms offer workers the opportunity to buy shares in the firm at discounted rates through employee stock purchase plans (ESPP). The discounted rate creates a gift exchange, where the firm hopes that workers who accept the gift reciprocate with greater loyalty and effort. But ESPPs diverge from standard gift exchange or efficiency wage models. Employees have to invest some of their own money by purchasing shares at the discounted rate to accept the gift. A sizeable number choose to reject the gift. In addition, the value of the ESPP gift varies with the share price and thus with the performance of the firm and the effort of workers in total. For workers who buy subsidized shares, an ESPP sets up a group incentive pay system analogous to profit sharing, all-employee stock options, or an employment ownership scheme that makes part of workers' compensation depend on company performance.
    Keywords: Share ownership, job search, quits, sickness absence, effort, gift exchange, incentives 
    JEL: J24 J33 J54 J63 M52
    Date: 2014–10
  2. By: Hildenbrand, Andreas; Duran, Mihael
    Abstract: A monopolist is treated as a nexus of contracts with team production. It has one owner-manager who is the employer of two employees. A team production problem is present if the employer is a “managerial lemon.†If the team production problem is solved, the employer is a “managerial hotshot.†Both managerial hotshot and managerial lemon are found to make profit. Therefore, managerial slack can exist in our monopoly market. Whereas the employer has the incentive to improve management capability in principle, the employees have the incentive to keep management capability low. Moreover, the cost of improving management capability may be prohibitively high. Consequently, managerial slack can persist. The predicted behavior of the monopolist contradicts the neoclassical prediction of market performance in both cases.
    Keywords: firm organization; market structure; property rights
    JEL: C7 D2 D4 L1 L2
    Date: 2014–09–15
  3. By: Eszter Czibor (University of Amsterdam); Sander Onderstal (University of Amsterdam); Randolph Sloof (University of Amsterdam); Mirjam van Praag (Copenhagen Business School, Denmark)
    Abstract: The provision of non-pecuniary incentives in education is a topic that has received much scholarly attention lately. Our paper contributes to this discussion by investigating the effectiveness of grade incentives in increasing student performance. We perform a direct comparison of the two most commonly used grading practices: the absolute (i.e., criterion-referenced) and the relative (i.e., norm-referenced) grading schemes in a large-scale field experiment at a university. We hypothesize that relative grading, by creating a rank-order tournament in the classroom, provides stronger incentives for male students than absolute grading. In the full sample, we find weak support for our hypothesis. Among the more motivated students we find evidence that men indeed score significantly higher on the test when graded on a curve. Female students, irrespective of their motivation, do not increase their scores under relative grading. Since women slightly outperform men under absolute grading, grading on a curve actually narrows the gender gap in performance.
    Keywords: Education, Test performance, Grade incentives, Competition, Gender, Field experiment
    JEL: I21 I23 A22 D03 C93
    Date: 2014–08–28
  4. By: Paul H. Kupiec (American Enterprise Institute)
    Abstract: In a financial intermediary, risk managers can expend effort to reduce loan probability of default and loss given default, but effort is unobservable. Incentive compensation (IC) can induce manager effort. When deposit insurance is subsidized, the demand for risk management declines. Regulatory policy should then reinforce incentives to offer risk mangers appropriate IC contracts.
    Keywords: AEI Economic Policy Working Paper Series, Financial services
    JEL: G
    Date: 2013–10
  5. By: Jin, Xin
    Abstract: This article studies the negative signals associated with non-promotion. I first show theoretically that, when workers’ productivity rises little with additional years on the same job level, the negative signal associated with non-promotion leads to wage decreases. On the other hand, when additional job-level tenure leads to a sizable increase in productivity, workers’ wages increase. I test my model’s predictions using the personnel records from a large US firm from 1970-1988. I find a clear hump-shaped wage-job-tenure profile for workers who stay in the same job level, which supports my model’s prediction.
    Keywords: Asymmetric information, human capital accumulation, signaling, promotion, wages
    JEL: J24 J31 M51
    Date: 2014

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