nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2014‒12‒24
thirteen papers chosen by
Tommaso Reggiani
Universität zu Köln

  1. Managing the Family Firm: Evidence from CEOs at Work By Oriana Bandiera; Andrea Prat; Raffaella Sadun
  2. Heterogeneity, Selection and Labor Market Disparities By Bonfiglioli, Alessandra; Gancia, Gino A
  3. Organizational architecture and pro-social behavior : Three essays By Yin, H.
  4. Relational Contracts and Specific Training By James Malcomson
  5. Estimating the Returns to Schooling Using Cohort-Level Maternal Education as an Instrument By Winters, John V.
  6. “Phantom of the Opera” or “Sex and the City”? Historical Amenities as Sources of Exogenous Variation By Bauer, Thomas; Breidenbach, Philipp; Schmidt, Christoph M
  7. Enrollment and degree completion in higher education without admission standards By Declercq, Koen; Verboven, Frank
  8. The impact on wages of generic competencies, psychological capital, new work practices and digital technologies By Paola Gritti; Riccardo Leoni
  9. The effect of corporate governance on the performance of US investment banks. By mamatzakis, em
  10. Teacher Pay and Student Performance: Evidence from the Gambian Hardship Allowance By Pugatch, Todd; Schroeder, Elizabeth
  11. Locus of Control and the Labor Market By Deborah Cobb-Clark
  12. Does temporal and locational flexibility of work reduce absenteeism? By D.S. Possenriede; W.H.J. Hassink; J. Plantenga
  13. Customary Norms, Inheritance, and Human Capital: Evidence from a Reform of the Matrilineal System in Ghana By La Ferrara, Eliana; Milazzo, Annamaria

  1. By: Oriana Bandiera; Andrea Prat; Raffaella Sadun
    Abstract: CEOs affect the performance of the firms they manage, and family CEOs seem to weaken it. Yet little is known about what top executives actually do, and whether it differs by firm ownership. We study CEOs in the Indian manufacturing sector, where family ownership is widespread and the productivity dispersion across firms is substantial. Time use analysis of 356 CEOs of listed firms yields three sets of findings. First, there is substantial variation in the number of hours CEOs devote to work activities, and longer working hours are associated with higher firm productivity, growth, profitability and CEO pay. Second, family CEOs record 8% fewer working hours relative to professional CEOs. The difference in hours worked is more pronounced in low competition environments and does not seem to be explained by measurement error. Third, difference in diffrences estimates with respect to the cost of effort, due to weather shocks and popular sport events, reveal that the observed difference between family and professional CEOs is consistent with heterogeneous preferences for work versus leisure. Evidence from six other countries reveals similar findings in economies at different stages of development.
    Date: 2013–12
  2. By: Bonfiglioli, Alessandra; Gancia, Gino A
    Abstract: We study the incentives to improve ability in a model where heterogeneous firms and workers interact in a labor market characterized by matching frictions and costly screening. When effort in improving ability raises both the mean and the variance of the resulting ability distribution, multiple equilibria may arise. In the high-effort equilibrium, heterogeneity in ability is sufficiently large to induce firms to select the best workers, thereby confirming the belief that effort is important for finding good jobs. In the low-effort equilibrium, ability is not sufficiently dispersed to justify screening, thereby confirming the belief that effort is not so important. The model has implications for wage inequality, the distribution of firm characteristics, sorting patterns between firms and workers, and unemployment rates that can help explaining observed cross-country variation in socio-economic and labor market outcomes.
    Keywords: Beliefs; Effort; Firm Heterogeneity; Multiple Equilibria; Selection; Sorting; Unemployment; Wage Inequality
    JEL: E24 J24 J64
    Date: 2014–05
  3. By: Yin, H. (Tilburg University, School of Economics and Management)
    Abstract: Social motivations and double-sided information asymmetry are present in many accounting contexts. This thesis recognizes that managers can have social motivations and there can be double-sided information asymmetry between managers and employees, and will illustrate that accounting choices and decisions by principals, and accounting solutions by organizations, may look different and may have to be revised when considering social motivations and double-sided information asymmetry. Chapter 2 examines the effect of delegating decision rights about cost reduction in capital budgeting and the type of compensation contracts on the managers’ misrepresentation of private information. Results show that the delegation of decision rights produces an important responsibility effect that makes managers care about the superiors’ interest. The responsibility effect materializes when managers receive a fixed wage contract without truth telling incentives, but fails to materialize when managers receive a contract with the incentives. The findings suggest that firms may be better off by combining delegation with a fixed wage contract in settings where social motivations are important. Chapter 3 examines how a principal’s choice of a truth-telling incentive contract affects the honesty of their agents’ cost reporting in a setting where principals may have information about social norms unknown to agents. Results show that the principal’s choice of incentives produces besides an incentive effect a negative information leakage effect. This choice leaks information of a selfish social norm. Agents conform to this social norm by misrepresenting cost information more. The results suggest that managers must recognize that their decisions can leak information, which may produce unanticipated consequences for the social norms at play in the organization. Chapter 4 studies the effect of an open policy (revealing the manager behavior openly to employees) and granting managers discretion over rewarding employees on managers’ propensity to behave well towards the organization. Results show that managers are more likely to behave well towards the organization under the open policy compared to the closed policy (employees cannot observe the manager behavior). The effect of the open policy on controlling managers is larger when managers have discretion over rewarding employees than when they do not have the discretion.
    Date: 2014
  4. By: James Malcomson
    Abstract: This paper explores the implications of specific training for relational contracts.  A standard result for sustaining a relational contract is that the parties must jointly receive a surplus over what they can get by separating.  This has been interpreted as employees with relational contracts having discretely higher pay and productivity than inherently equally productive, or near equally productive employees without relational contracts.  Investment in specific training relaxes the incentive constraints on relational contracts, so the optimal level of investment can be higher for those with a relational contract than for those without, adding further to the productivity of those employed under a relational contract.  But the additional cost of optimal investment precisely offsets the post-investment surplus for marginal employees in relational contracts, which removes the discontinuity in the joint payoff from a relational contract.  An example shows that with optimal investment there may not even be a discontinuity in productivity between those employed with a relational contract and those employed without one because the incentive constraints on the former result in lower effort despite their higher training.
    Keywords: relational incentive contracts, investment, specific training, dual labour market
    JEL: C73 D82 D86
    Date: 2014–11–19
  5. By: Winters, John V. (Oklahoma State University)
    Abstract: Formal education is widely thought to be a major determinant of individual earnings. This paper uses the American Community Survey to examine the effect of formal schooling on worker wages. Given the potential endogeneity of education decisions, I instrument for individual schooling using cohort-level mean maternal years of schooling from previous decennial censuses. The instrumental variables results suggest that schooling has a significant positive effect on worker wages. Specifically, an additional year or schooling is estimated to increase hourly wages by 10 percent for men and 12.6 percent for women.
    Keywords: human capital, education, returns to schooling, wages, maternal education
    JEL: J24 J31
    Date: 2014–11
  6. By: Bauer, Thomas; Breidenbach, Philipp; Schmidt, Christoph M
    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: historical amenities; human capital; regional competitiveness
    JEL: H42 J24 R11
    Date: 2014–08
  7. By: Declercq, Koen; Verboven, Frank
    Abstract: Many countries organize their higher education system with limited or no ex ante admission standards. They instead rely more heavily on an ex post selection mechanism, based on the students' performance during higher education. We analyze how a system with ex post selection affects initial enrollment and final degree completion, using a rich dataset for Belgium (region of Flanders). We develop a dynamic discrete choice model of college/university and major choice, where the outcome of the enrollment decision is uncertain. Upon observing past performance, students may decide to continue, reorient to another major, or drop out. We find that ex post student selection is very strong: less than half of the students successfully complete their course work in the first year. Unsuccessful students mainly switch from university to college majors, or from college majors to drop-out. We use the estimates of our model to evaluate the effects of alternative, ex ante admission policies. We find that a suitably designed ex ante screening system (with moderate admission thresholds) can considerably increase degree completion in higher education. A discriminatory screening system for universities only, can raise total degree completion even more, though it implies a shift from university to college degrees.
    Keywords: admission policies; dynamic discrete choice; higher education
    JEL: I20
    Date: 2014–06
  8. By: Paola Gritti; Riccardo Leoni
    Abstract: This paper examines the impact of competencies, psychological capital, new work practices and digital technologies on private sector wages in the Italian economy. It demonstrates ? also considering industry collective bargaining that tends to fix wage levels according to job complexity, moreover giving rise to employment relations governed by incomplete contracts ? that firms pay extra wage premia to workers who: i) use digital technologies, provided they are versatile in the use of these new tools, ii) activate a bundle of distinctive ‘generic’ competencies, iii) possess personal traits considered by the firm as productive in carrying out work, and iv) occupy positions to which the organizational design attributes greater autonomy and more responsibilities. The wage equation used controls for several detailed factors (firm characteristics, occupations, worker characteristics, working and contract conditions, industrial relations) and was estimated with weighted OLS, also controlling for heteroskedasticity. Endogeneity was tested with GMM estimators.
    Keywords: wages; competencies; technologies
    JEL: J24 J31 O33
    Date: 2013
  9. By: mamatzakis, em
    Abstract: This paper focuses on the impact of the corporate governance, using a plethora of measures, on the performance of US investment banks over the 2000-2012 period. This time period offers a unique set of information, related to the credit crunch, that we model using a dynamic threshold analysis to reveal new insights into the relationship between corporate governance and bank performance. Results show that the board size asserts a negative effect on performance consistent with the ‘agency cost hypothesis’, particularly for banks with board size higher than ten members. Threshold analysis reveals that in the post-crisis period most of investment banks opt for boards with less than ten members, aiming to decrease agency conflicts that large boards suffer from. We also find a negative association between operational complexity and performance. Moreover, CEO power asserts a positive effect on performance consistent with the ‘stewardship hypothesis’. In addition, an increase in the bank ownership held by the board has a negative impact on performance for banks below a certain threshold. On the other hand, for banks with board ownership above the threshold value this effect turns positive, indicating an alignment between shareholders’ and managers’ incentives.
    Keywords: Investment Banking, Corporate governance, Performance, Board size, CEO power, Board Ownership.
    JEL: G18 G2 G21 G3 G38
    Date: 2014–11–14
  10. By: Pugatch, Todd (Oregon State University); Schroeder, Elizabeth (Oregon State University)
    Abstract: We evaluate the impact of the Gambian hardship allowance, which provides a salary premium of 30-40% to primary school teachers in remote locations, on student performance. A geographic discontinuity in the policy's implementation provides identifying variation. We find no effects of the hardship allowance on average student performance. These null average effects hide important heterogeneity, with learning gains for students at the top of the distribution and losses for those at the bottom. With over two dozen developing countries implementing similar policies to increase teacher compensation in rural schools, this study offers important evidence on their effectiveness.
    Keywords: teacher compensation, rural schools, Gambia, program evaluation, regression discontinuity
    JEL: I25 I28 J38 J45 O12 O15
    Date: 2014–11
  11. By: Deborah Cobb-Clark (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; Institute for the Study of Labor (IZA); and ARC Centre of Excellence for Children and Families over the Life Course)
    Abstract: This paper reviews the role of locus of control in the labor market. I begin with a discussion of the conceptual origins of locus of control, including its relationship to related concepts such as self-efficacy, motivation, and self-control. The relationship between locus of control and labor market success is then summarized. In doing so, I pay careful attention to what we know about three potential mechanisms – human capital investments, hiring decisions, and optimal incentive contracts – through which locus of control might operate. Finally, the broader implications of these relationships for public policy and future research are discussed.
    Keywords: Locus of control, labor markets, non-cognitive skills, behavioral labor economics
    JEL: J01 J08
    Date: 2014–11
  12. By: D.S. Possenriede; W.H.J. Hassink; J. Plantenga
    Abstract: In this study, the effects of temporal and locational flexibility or work on the frequency and length of sickness absenteeism are analysed. Using a Dutch survey of public sector employees, we show that increased temporal and locational flexibility is negatively associated with sickness absenteeism in general. Especially flexi-time, i.e. schedule flexibility which is quickly adjustable, reduces both the frequency and in particular the duration of absences. Telehomework or location flexibility on the other hand seems to mainly affect absence frequency but not absence duration. In contrast, long-term duration flexibility in the form of part- time work does not appear to have a significant impact on absenteeism.
    Keywords: absenteeism, flexi-time, locational flexibility, part-time work, telehomework, temporal flexibility
    Date: 2014
  13. By: La Ferrara, Eliana; Milazzo, Annamaria
    Abstract: This paper studies the effects of descent rules on human capital accumulation. We exploit a policy experiment in Ghana that introduced minimum quotas for the land that parents should devolve on their children. This policy differentially affected ethnic groups depending on their descent rules: the matrilineal Akan saw a reduction in the share of land going to the matriclan and an increase in the land going to male children (who could not inherit from their own fathers before the reform). Patrilineal groups were instead less affected because sons could already inherit from fathers before the reform. Using a difference-in-differences strategy, across cohorts and ethnic groups, we estimate the impact of the reform on educational attainment. We find that Akan boys exposed to the reform received on average 0.9 less years of education, a 10 percent reduction. The effect is driven by landed households, for whom the reform did effectively bind, while no effect is found for non-landed households. This evidence is consistent with the fact that before the reform matrilineal groups in Ghana "over-invested" in education to substitute for land inheritance. Our findings suggest that in the presence of customary norms, land reform and the individualization of land rights may have implications that go beyond the agricultural sector and affect human capital accumulation in the long run.
    Keywords: education; Ghana; inheritance reform; land rights
    JEL: I25 O12
    Date: 2014–09

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