nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2014‒11‒28
fifteen papers chosen by
Tommaso Reggiani
Universität zu Köln

  1. Incentives for Research Agents: Optimal Contracts and Implementation By Yaping Shan
  2. Do Star Performers Produce More Stars? Peer Effects and Learning in Elite Teams By Casey Ichniowski; Anne Preston
  3. "Making It Count": Evidence from a Field Study on Assessment Rules, Study Incentives and Student Performance By Chevalier, Arnaud; Dolton, Peter; Lührmann, Melanie
  4. Turf Wars By Herrera, Helios; Reuben, Ernesto; Ting, Michael M.
  5. CEO fitness and firm value By Limbach, Peter; Sonnenburg, Florian
  6. Employee engagement of managerial staff in hospitals - An Indian pilot study By J, Swaminathan; S, Aramvalarthan
  7. Desert and Inequity Aversion in Teams By Gill, David; Stone, Rebecca
  8. Independent directors: less informed, but better selected? New evidence from a two-way director-firm fixed effect model By Sandra Cavaco; Patricia Crifo; Antoine Rebérioux; Gwenaël Roudaut
  9. Inequality aversion in long-term contracts By Cato, Susumu; Ebina, Takeshi
  10. Returns to University Quality in Australia: A Two-Stage Analysis By Carroll, David; Heaton, Christopher; Tani, Massimiliano
  11. Convergences in Men's and Women's Life Patterns: Lifetime Work, Lifetime Earnings, and Human Capital Investment By Jacobsen, Joyce P.; Khamis, Melanie; Yuksel, Mutlu
  12. Compliant sinners, obstinate saints: How power and self-focus determine the effectiveness of social influences in ethical decision making By Marko Pitesa; Stefan Thau
  13. The Long Run Human Capital and Economic Consequences of High-Stakes Examinations By Victor Lavy; Avraham Ebenstein; Sefi Roth
  14. Workplace Democracy and Job Flows By Alves, Guillermo; Burdín, Gabriel; Dean, Andres
  15. Inputs in the Production of Early Childhood Human Capital: Evidence from Head Start By Christopher Walters

  1. By: Yaping Shan (School of Economics, University of Adelaide)
    Abstract: We study the agency problem between a firm and its research employees. In a multi-agent contracting setting, we show explicitly the way in which the optimal incentive regime is a function of how agents' efforts interact with one another: relative-performance evaluation is used when their efforts are substitutes whereas joint-performance evaluation is used when their efforts are complements. We also provide an implementation of the optimal contract, in which a primary component of the agents' compensation is a risky security. This implementation gives a theoretical justification for the wide-spread use of stock-based compensation by firms that rely on R&D.
    Keywords: Dynamic Contract, Repeated Moral Hazard, Multi-agent Incentive, R&D, Em- ployee Compensation
    JEL: D23 D82 D86 J33 L22 O32
    Date: 2013–11
  2. By: Casey Ichniowski; Anne Preston
    Abstract: This study investigates the professional soccer industry to ask whether the talent of an individual's co-workers helps explain differences in the rate of human capital accumulation on the job. Data tracking national soccer team performance and the professional leagues their members play for are particularly well suited for developing convincing non-experimental evidence about these kinds of peer effects. The empirical results consistently show that performance improves more after an individual has been a member of an elite team than when he has been a member of lower level teams. The conclusion is borne out by a rich set of complementary data on: national team performance, player-level performance, performance of foreign players who joined elite teams after an exogenous shift in the number of foreign players participating on top club teams, performance of players on national teams in the year just before and the year just after they join an elite club team, and experiences of several national team players obtained through personal interviews.
    JEL: J0 J24
    Date: 2014–09
  3. By: Chevalier, Arnaud (IZA); Dolton, Peter (University of Sussex); Lührmann, Melanie (Royal Holloway, University of London)
    Abstract: This paper examines a quasi-experiment in which we encourage student effort by setting various weekly incentives to engage in online tests. Our identification strategy exploits i) weekly variation in incentives to determine their impact on student effort, and ii) controlled cross-group variation in assessment weighting. Assessment weighting strongly encourages quiz participation, without displacing effort over the year. We estimate the return to a quiz at around 0.15 of a standard deviation in exam grade. Effort in our study increases most for students at and below median ability, resulting in a reduction of the grade gap by 8%.
    Keywords: incentive, feedback, effort, higher education
    JEL: I23 D20
    Date: 2014–10
  4. By: Herrera, Helios (HEC Montreal); Reuben, Ernesto (Columbia University); Ting, Michael M. (Columbia University)
    Abstract: Turf wars commonly occur in environments where competition undermines collaboration. We develop a game theoretic model and experimental test of turf wars. The model explores how team production incentives ex post affect team formation decisions ex ante. In the game, one agent decides whether to share jurisdiction over a project with other agents. Agents with jurisdiction decide whether to exert effort and receive a reward based on their relative performance. Hence, sharing can increase joint production but introduces competition for the reward. We find that collaboration has a non-monotonic relationship with both productivity and rewards. The laboratory experiment confirms the model's main predictions. We also explore extensions of the basic model, including one where each agent's productivity is private information.
    Keywords: turf war, bureaucracy, jurisdiction, competition, information withholding
    JEL: D73 D74 D82
    Date: 2014–10
  5. By: Limbach, Peter; Sonnenburg, Florian
    Abstract: This study finds a positive relation between CEO fitness and firm value. For each of the years 2001 to 2011, we define CEOs of S&P 1500 companies as being fit if they finish a marathon. The literature suggests that fitness moderates stress and positively affects cognitive functions and performance. Accordingly, we find the strongest effects on firm value in subsamples where fitness is most important, i.e., for CEOs with high workload, above median age, and above median tenure. Fit CEOs are further associated with significantly higher abnormal announcement returns in M&A bids for large, public, and cross-border targets, concomitant with high stress. Our findings can explain the importance of CEO fitness in the managerial labor market and the trend among CEOs to stay fit.
    Keywords: CEO characteristics,CEO fitness,CEO work load,firm value,mergers and acquisitions
    JEL: G32 G34 J24
    Date: 2014
  6. By: J, Swaminathan; S, Aramvalarthan
    Abstract: Employee engagement is a state of emotional and intellectual involvement that employees have in an organization. An engaged employee is aware of business context, and works with colleagues to improve performance within the job for the benefit of the organization. It is a positive attitude held by the employees towards the organization and its values. This study focused on how employee engagement is an antecedent of job involvement and what should the management of hospitals do to make their managers engaged. This study conducted was to find out the levels of employee engagement, the drivers of it, which includes Employee Empowerment, Communication, Team Work, Training and Development,Recognition, Leadership Quality, and Work Life Balance to analyze their impact and to offer suggestions to improve the same. The study adopted non-probability sampling using systematic method to collect primary data. The samples of the study constituted 100 managerial staff from various hospitals in Nagapattinam District, Tamil Nadu, India. Anova,Chi square and Paired t test were employed in the analysis of data. The results of the study indicated that the Employee Engagement of Managerial Staff in Hospitals of Nagapattinam District is moderate and Recognition helps to attain Employee Engagement.. The hospitals should concentrate on dimensions like Recognition and Team work to improve Employee Engagement of the hospitals.
    Keywords: Employee empowerment, Team work, Recognition, Communication, Work life Balance
    JEL: I19
    Date: 2013–01
  7. By: Gill, David (University of Oxford); Stone, Rebecca (University of California, Los Angeles)
    Abstract: Teams are becoming increasingly important in work settings. We develop a framework to study the strategic implications of a meritocratic notion of desert under which team members care about receiving what they feel they deserve. Team members find it painful to receive less than their perceived entitlement, while receiving more may induce pleasure or pain depending on whether their preferences exhibit desert elation or desert guilt. Our notion of desert generalizes distributional concern models to situations in which effort choices affect the distribution perceived to be fair; in particular, desert nests inequity aversion over money net of effort costs as a special case. When identical teammates share team output equally, desert guilt generates a continuum of symmetric equilibria. Equilibrium effort can lie above or below the level in the absence of desert, so desert guilt generates behavior consistent with both positive and negative reciprocity and may underpin social norms of cooperation.
    Keywords: desert, deservingness, equity, inequity aversion, loss aversion, reference-dependent preferences, guilt, reciprocity, social norms, team production
    JEL: D63 J33
    Date: 2014–08
  8. By: Sandra Cavaco; Patricia Crifo; Antoine Rebérioux; Gwenaël Roudaut
    Abstract: This paper develops a two-way director-firm fixed effect model to study the relationship between independent directors’ individual heterogeneity and firm operating performance, using French data. This strategy allows considering and differentiating in a unified empirical framework mechanisms related to board functioning and mechanisms related to director selection. We first show that the independence status, netted out unobservable individual heterogeneity, is negatively related to performance. This result suggests that independent board members experience a strong informational gap that outweighs other monitoring benefits. However, we show that industry-specific expertise as well as informal connections inside the boardroom may help to bridge this gap. Second, we provide evidence that independent directors have higher intrinsic ability as compared to affiliated board members, consistent with a reputation-based selection process.
    Keywords: independent director heterogeneity, information asymmetry, director selection, firm performance, two-way fixed effect model.
    JEL: G30 G34
    Date: 2014
  9. By: Cato, Susumu; Ebina, Takeshi
    Abstract: This paper examines a two-period moral hazard model with an inequality-averse agent. We show how the agent's past performance will help the principal to relax incentive compatibility constraints and how the existence of an inequality aversion of the agent affects a level of wage in each period in a long-term contract. In particular, we focus on the performance in period 1 on the level of wage in period 2. We show that the agent's wage in period 2 depends on performance in periods 1 and 2. This implies that the long-term relationship creates the opportunity for intertemporal risk and inequality sharing.
    Keywords: Moral hazard, Inequality aversion, Behavioral contract theory, Distribution
    JEL: D63 D86 J31 L23
    Date: 2014–11–14
  10. By: Carroll, David (UNSW Canberra); Heaton, Christopher (Macquarie University, Sydney); Tani, Massimiliano (IZA)
    Abstract: This study investigates the relationship between university quality and graduate starting salaries using pooled Australian data from the Graduate Destination survey and a two-stage estimation methodology. The results suggest that average starting salaries for young undergraduates differ significantly across universities after controlling for relevant confounding factors, though the range of university effects is fairly small in relation to other salary determinants, particularly course area. The results are robust to alternative specifications and suggest that employers generally do not place salary premia on attending a high-quality or prestigious university, at least upon workforce entry.
    Keywords: human capital, returns to education, university choice
    JEL: A22 I23 J24
    Date: 2014–09
  11. By: Jacobsen, Joyce P. (Wesleyan University); Khamis, Melanie (Wesleyan University); Yuksel, Mutlu (Dalhousie University)
    Abstract: The changes in women and men's work lives have been considerable in recent decades. Yet much of the recent research on gender differences in employment and earnings has been of a more snapshot nature rather than taking a longer comparative look at evolving patterns. In this paper, we use 50 years (1964-2013) of US Census Annual Demographic Files (March Current Population Survey) to track the changing returns to human capital (measured as both educational attainment and potential work experience), estimating comparable earnings equations by gender at each point in time. We consider the effects of sample selection over time for both women and men and show the rising effect of selection for women in recent years. Returns to education diverge for women and men over this period in the selection-adjusted results but converge in the OLS results, while returns to potential experience converge in both sets of results. We also create annual calculations of synthetic lifetime labor force participation, hours, and earnings that indicate convergence by gender in worklife patterns, but less convergence in recent years in lifetime earnings. Thus, while some convergence has indeed occurred, the underlying mechanisms causing convergence differ for women and men, reflecting continued fundamental differences in women's and men's life experiences.
    Keywords: gender earnings gap, lifetime work, lifetime earnings, human capital investment
    JEL: J3 J16 J24 N3
    Date: 2014–08
  12. By: Marko Pitesa (GEM - Grenoble Ecole de Management - Grenoble École de Management (GEM)); Stefan Thau (LBS - London Business School - London Business School)
    Abstract: In this research, we examine when and why organizational environments influence how employees respond to moral issues. Past research proposed that social influences in organizations affect employees' ethical decision making, but did not explain when and why some individuals are affected by the organizational environment and some disregard it. To address this problem, we drew on research on power to propose that power makes people more self-focused, which, in turn, makes them more likely to act upon their preferences and ignore (un)ethical social influences. Using both experimental and field methods, we tested our model across the three main paradigms of social influence: informational influence (Study 1 and 2), normative influence (Study 3), and compliance (Study 4). Results offer converging evidence for our theory.
    Keywords: ethical decision making, power, social influences, self-focus
    Date: 2013–06–03
  13. By: Victor Lavy; Avraham Ebenstein; Sefi Roth
    Abstract: Cognitive performance during high-stakes exams can be affected by random disturbances that, even if transitory, may have permanent consequences for long-term schooling attainment and labor market outcomes. We evaluate this hypothesis among Israeli high school students who took a series of high stakes matriculation exams between 2000 and 2002. As a source of random (transitory) shocks to high- stakes matriculation test scores, we use exposure to ambient air pollution during the day of the exam. First, we document a significant and negative relationship between average PM2.5 exposure during exams and student composite scores, post-secondary educational attainment, and earnings during adulthood. Second, using PM2.5 as an instrument, we estimate a large economic return to each point on the exam and each additional year of post-secondary education. Third, we examine the return to exam scores and schooling across sub-populations, and find the largest effects among boys, better students, and children from higher socio-economic backgrounds. The results suggest that random disturbances during high-stakes examinations can have long-term consequences for schooling and labor market outcomes, while also highlighting the drawbacks of using high-stakes examinations in university admissions.
    JEL: I21 J24
    Date: 2014–10
  14. By: Alves, Guillermo (IECON, Universidad de la República); Burdín, Gabriel (IECON, Universidad de la República); Dean, Andres (IECON, Universidad de la República)
    Abstract: This paper investigates the relationship between workplace democracy and job flows (net job creations, gross job creations and destructions) by comparing the behavior of worker-managed firms (WMFs) and conventional firms. The empirical analysis relies on high frequency administrative firm-level panel data from Uruguay over the period April 1996-July 2009. The main findings of the paper are that (1) WMFs exhibit much more stable job dynamics than CFs; (2) both types of firms have decreasing in age and increasing in size gross job creation profiles; (3) there are heterogeneous employment regimes within WMFs: high job creation and destruction rates of hired workers and low job creation and destruction of members. This paper contributes to the literature on the role of institutions in shaping job flows. Our results may have important implications for the understanding of the allocative efficiency effects of worker participation.
    Keywords: job flows, worker-managed firms
    JEL: D21 J54 J63
    Date: 2014–10
  15. By: Christopher Walters
    Abstract: Studies of small-scale "model" early-childhood programs show that high-quality preschool can have transformative effects on human capital and economic outcomes. Evidence on the Head Start program is more mixed. Inputs and practices vary widely across Head Start centers, however, and little is known about variation in effectiveness within Head Start. This paper uses data from a multi-site randomized evaluation to quantify and explain variation in effectiveness across Head Start childcare centers. I answer two questions: (1) How much do short-run effects vary across Head Start centers? and (2) To what extent do inputs, practices, and child characteristics explain this variation? To answer the first question, I use a selection model with random coefficients to quantify heterogeneity in Head Start effects, accounting for non-compliance with experimental assignments. Estimates of the model show that the cross-center standard deviation of cognitive effects is 0.18 test score standard deviations, which is larger than typical estimates of variation in teacher or school effectiveness. Next, I assess the role of observed inputs, practices and child characteristics in generating this variation, focusing on inputs commonly cited as central to the success of model programs. My results show that Head Start centers offering full-day service boost cognitive skills more than other centers, while Head Start centers offering frequent home visiting are especially effective at raising non-cognitive skills. Head Start is also more effective for children with less-educated mothers. Centers that draw more children from center-based preschool have smaller effects, suggesting that cross-center differences in effects may be partially due to differences in counterfactual preschool options. Other key inputs, including the High/Scope curriculum, teacher education, and class size, are not associated with increased effectiveness in Head Start. Together, observed inputs explain about one-third of the variation in Head Start effectiveness across experimental sites.
    JEL: I21 J24
    Date: 2014–10

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