nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2014‒12‒29
twenty-one papers chosen by
Tommaso Reggiani
Universität zu Köln

  1. A field experiment in motivating employee ideas By Gibbs, Michael; Neckermann, Susanne; Siemroth, Christoph
  2. The Value of Informativeness for Contracting By Chaigneau, Pierre; Edmans, Alex; Gottlieb, Daniel
  3. Career Prospects and Effort Incentives: Evidence from Professional Soccer By Jeanine Miklós-Thal; Hannes Ullrich
  4. Do Female Executives Make a Difference? The Impact of Female Leadership on Gender Gaps and Firm Performance By Flabbi, Luca; Macis, Mario; Moro, Andrea; Schivardi, Fabiano
  5. The effect of charitable giving on workers’ performance. Experimental evidence By Gary Charness; Ramón Cobo-Reyes; Angela Sanchez
  6. The Informativeness Principle Under Limited Liability By Chaigneau, Pierre; Edmans, Alex; Gottlieb, Daniel
  7. The Value of Bosses By Edward P. Lazear; Kathryn L. Shaw; Christopher T. Stanton
  8. Human Capital Risk, Contract Enforcement, and the Macroeconomy By Krebs, Tom; Kuhn, Moritz; Wright, Mark L. J.
  9. Compromises and Incentives By Sonia Di Giannatale Menegalli; Itza T. Q. Curiel-Cabral
  10. Economic growth, human capital and structural change: an empirical analysis By Anabela Queirós; Aurora A.C. Teixeira
  12. The tradeoff between fertility and education: Evidence from the Korean development path By Jun, Bogang; Lee, Joongho
  13. The length of exposure to antipoverty transfer programmes: what is the relevance for children's human capital formation? By Juan M. Villa
  14. Exporting and Firm Performance: Evidence from a Randomized Trial By David Atkin; Amit K. Khandelwal; Adam Osman
  15. Birthplace diversity and productivity spill-overs in firms By René Böheim; Thomas Horvath; Karin Mayr
  16. Estimating the human capital stock for Cape Verde, 1950-2012 By Silves J.C. Moreira; Pedro Cosme Vieira; Aurora A.C. Teixeira
  17. Executive Remuneration and the Payout Decision By Geiler, P.H.M.; Renneboog, L.D.R.
  18. Making Aid Work: Governance and Decentralization By Gil S. Epstein; Ira N. Gang
  19. Working time, satisfaction and work life balance: A European perspective. By Stephan Humpert
  20. The Value of Smarter Teachers: International Evidence on Teacher Cognitive Skills and Student Performance By Hanushek, Eric A.; Piopiunik, Marc; Wiederhold, Simon
  21. Does History Fully Determine the Spatial Distribution of Human Capital ? By Henri Busson

  1. By: Gibbs, Michael; Neckermann, Susanne; Siemroth, Christoph
    Abstract: We study the effects of a field experiment designed to motivate employee ideas, at a large technology company. Employees were encouraged to submit ideas on process and product improvements via an online system. In the experiment, the company randomized 19 account teams into treatment and control groups. Employees in treatment teams received rewards if their ideas were approved. Nothing changed for employees in control teams. Our main finding is that rewards substantially increased the quality of ideas submitted. Further, rewards increased participation in the suggestion system, but decreased the number of ideas per participating employee, with zero net effect on the total quantity of ideas. The broader participation base persisted even after the reward was discontinued, suggesting habituation. We find no evidence for motivational crowding out. Our findings suggest that rewards can improve innovation and creativity, and that there may be a tradeoff between the quantity and quality of ideas.
    JEL: C93 J24 M52 O32
    Date: 2014
  2. By: Chaigneau, Pierre; Edmans, Alex; Gottlieb, Daniel
    Abstract: The informativeness principle demonstrates qualitative benefits to increasing signal precision. However, it is difficult to quantify these benefits -- and compare them against the costs of precision -- since we typically cannot solve for the optimal contract and analyze how it changes with informativeness. We consider a standard agency model with risk-neutrality and limited liability, where the optimal contract is a call option. The direct effect of reducing signal volatility is a fall in the value of the option, benefiting the principal. The indirect effect is a change in the agent's effort incentives. If the original option is sufficiently out-of-the-money, the agent can only beat the strike price if he exerts effort and there is a high noise realization. Thus, a fall in volatility reduces effort incentives. As the agency problem weakens, the gains from precision fall towards zero, potentially justifying pay-for-luck.
    Keywords: contract theory; informativeness principle; limited liability; options; pay-for-luck; principal-agent model; relative performance evaluation
    JEL: D86 J33
    Date: 2014–10
  3. By: Jeanine Miklós-Thal; Hannes Ullrich
    Abstract: It is difficult to test the prediction that future career prospects create implicit effort incentives because researchers cannot randomly “assign†career prospects to economic agents. To overcome this challenge, we use data from professional soccer, where employees of the same club face different external career opportunities depending on their nationality. We test whether the career prospect of being selected to a Euro Cup national team affects players' pre-Cup performances, using nationals of countries that did not participate in the Euro Cup as a control group. We find that the Euro Cup career prospect has positive effects on the performances of players with intermediate chances of being selected to their national team, but negative effects on the performances of players whose selection is very probable. Our findings have implications for the incentive effects of within-firm promotions and of external career opportunities.
    Keywords: incentives, effort, career concerns, reputation, contests, tournaments, promotions
    JEL: D23 L29 M52
    Date: 2014
  4. By: Flabbi, Luca; Macis, Mario; Moro, Andrea; Schivardi, Fabiano
    Abstract: We analyze a matched employer-employee panel data set and find that female leadership has a positive effect on female wages at the top of the distribution, and a negative one at the bottom. Moreover, performance in firms with female leadership increases with the share of female workers. This evidence is consistent with a model where female executives are better equipped at interpreting signals of productivity from female workers. This suggests substantial costs of under-representation of women at the top: for example, if women became CEOs of firms with at least 20% female employment, sales per worker would increase 6.7%.
    Keywords: executives’ gender; firm performance; gender gap; glass ceiling; statistical discrimination
    JEL: J16 J7 M12 M5
    Date: 2014–11
  5. By: Gary Charness (University of California at Santa Barbara); Ramón Cobo-Reyes (University of Exeter Business School.); Angela Sanchez (University of Exeter Business School.)
    Abstract: We investigate how donating worker earnings for voluntary extra work, a form of corporate social responsibility, affects worker behavior. In our experiment, participants performed a realeffort task. Subjects were asked to enter real data (from an unrelated experiment) for 60 minutes and were paid on a piece-rate basis. After the 60 minutes, they were then asked if they wished to stay for up to another 30 minutes; we varied the piece-rate pay and whether it was paid to the worker or to a charity. Our results show that when the piece rate paid is relatively high, workers do more extra work when they are directly paid this piece rate as compared to when their earnings are instead paid to a charity. However, with low piece rates, this relationship reverses and workers are much more motivated when the money is donated to a charity instead of when it is paid directly to them. This approach is potentially a win-win outcome for at least firms and charities. We also find that when we only pay a small amount to workers, their behavior differs only modestly from the situation in which we do not pay at all.
    Keywords: labor market, gift exchange-game, delegation, responsibility-allevietion, experiments.
    Date: 2014–04–27
  6. By: Chaigneau, Pierre; Edmans, Alex; Gottlieb, Daniel
    Abstract: This paper shows that the informativeness principle does not automatically extend to settings with limited liability. Even if a signal is informative about effort, it may have no value for contracting. An agent with limited liability is paid zero for certain output realizations. Thus, even if these output realizations are accompanied by an unfavorable signal, the payment cannot fall further and so the principal cannot make use of the signal. Similarly, a principal with limited liability may be unable to increase payments after a favorable signal. We derive necessary and sufficient conditions for signals to have positive value. Under bilateral limited liability and a monotone likelihood ratio, the value of information is non-monotonic in output, and the principal is willing to pay more for information at intermediate output levels.
    Keywords: contract theory; Informativeness principle; limited liability; options; pay-for-luck; principal-agent model; relative performance evaluation
    JEL: D86 J33
    Date: 2014–09
  7. By: Edward P. Lazear; Kathryn L. Shaw; Christopher T. Stanton
    Abstract: How and by how much do supervisors enhance worker productivity? Using a company-based data set on the productivity of technology-based services workers, supervisor effects are estimated and found to be large. Replacing a boss who is in the lower 10% of boss quality with one who is in the upper 10% of boss quality increases a team's total output by more than would adding one worker to a nine member team. Workers assigned to better bosses are less likely to leave the firm. A separate normalization implies that the average boss is about 1.75 times as productive as the average worker.
    Keywords: Bosses, supervisors, productivity
    JEL: M50 C13 C23 D20 L23
    Date: 2014–12
  8. By: Krebs, Tom (University of Mannheim); Kuhn, Moritz (Dept. of Economics, Adenauer); Wright, Mark L. J. (Federal Reserve Bank of Chicago)
    Abstract: We use data from the Survey of Consumer Finance and Survey of Income Program Participation to show that young households with children are under-insured against the risk that an adult member of the household dies. We develop a tractable macroeconomic model with human capital risk, age-dependent returns to human capital investment, and endogenous borrowing constraints due to the limited pledgeability of human capital (limited contract enforcement). We show analytically that, consistent with the life insurance data, in equilibrium young households are borrowing constrained and under-insured against human capital risk. A calibrated version of the model can quantitatively account for the life-cycle variation of life-insurance holdings, financial wealth, earnings, and consumption inequality observed in the US data. Our analysis implies that a reform that makes consumer bankruptcy more costly, like the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, leads to a substantial increase in the volume of both credit and insurance.
    Keywords: Human Capital Risk; Limited Enforcement; Life Insurance
    JEL: D52 E21 E24 J24
    Date: 2014–10–22
  9. By: Sonia Di Giannatale Menegalli (Division of Economics, CIDE); Itza T. Q. Curiel-Cabral
    Abstract: We analyze a situation where a Principal does not necessarily have all the bargaining power while negotiating a contract with an Agent by studying a dynamic multi-objective moral hazard model with hidden action. We .nd that the structure of the optimal contracts change along the Pareto Frontier, and that compromise solutions implement higher Agent.s e¤ort levels when compared to contracts located at the Pareto Frontier.s extremes. Our numerical results indicate that in compromise solutions, compared to the contracts located at the Pareto Frontier.s extremes, the Agent exerts higher e¤ort levels, the Agent.s future compensation schedules show higher spread, and the Agent.s salaries become more directly related to productivity outcomes as time goes on. When the coe¢ cient of relative risk aversion increases, compromise solutions tend to become closer to the Agent.s most advan-tageous contract. Improvements in the .rm.s productivity environment bene.t, in relative terms, the Agent more than the Principal when compromise solutions are implemented.
    Keywords: Asymmetric information, Principal-Agent Model, Incentives, Pareto Frontier, Compromise Solutions, Multi-Objective Problems, Evolutionary Algorithms
    JEL: C63 C78 D61 D82 D86 L14
    Date: 2013–09
  10. By: Anabela Queirós (Faculdade de Economia do Porto); Aurora A.C. Teixeira (CEF.UP, Faculdade de Economia, Universidade do Porto; INESC TEC; OBEGEF)
    Abstract: Human capital is identified as one of the main determinants of economic growth and plays an important role in the technological progress of countries. Nevertheless, existing studies have to some extent neglected the importance of human capital on growth via the interaction it can have with a country’s industrial specialization. Additionally, the emphasis is mainly placed on supply-side determinants, being demand-side factors quite neglected, particularly the relevance of the processes of structural change. Thus, using a growth model which integrates variables from both the supply side and demand side, we assess the direct and indirect effects of human capital on economic growth, including in the latter the interaction of human capital with the industrial specialization of countries. Based on econometric panel data estimations involving a set of OCDE countries over 1960-2011, we found that the countries’ productive specialization dynamics is a crucial factor for economic growth. It is also shown that the interaction between human capital and structural change towards high knowledge-intensive industries impacts on the economic growth. However, the sign of this effect depends on the type of country and length of the period of analysis. Specifically, in the long term and in developed countries, where knowledge-intensive industries already account for a great share of the economy, the impact of the interaction between human capital and structural change is positive. In the case of less developed countries, and considering a shorter time period, the effect of human capital via specialization in high-tech and knowledge-intensive activities emerged as negative.
    Keywords: Economic Growth; Human Capital; Structural Change; Panel Data
    JEL: J24 O3 O4 O47
    Date: 2014–11
  11. By: Agarwal, Promila
    Abstract: The influence of factors outside the boundaries of organization is largely ignored in the examination of psychological contract. The objective of the current research is to empirically examine the association between industry/sector and psychological contract. The article examines the variation in the psychological contract among employees working in pharmaceutical and FMCG sectors. The cross sectional study gathered data from survey. Total 1000 employees participants from 14 organizations, 7 organization from pharmaceutical (N=500) and 7 organizations from FMCG sector (N=500). The findings suggest that employees of pharmaceutical and FMCG sector hold different psychological contract. The article has implications for both researchers and practitioners. The findings will contribute to researchers and scholars interested in the area of psychological contract in understanding the influence of external factors on psychological contract and the complexity associated with these factors. The practitioners can use the information in diagnosing the prevalent psychological contract and managing relationship with their employees.
  12. By: Jun, Bogang; Lee, Joongho
    Abstract: Unified Growth Theory suggests the demographic transition and the associated rise in human capital formation were critical forces in the transition from Malthusian stagnation to modern economic growth. This paper provides empirical evidence in support of this hypothesis based on the Korean industrialization in the late 20th century. Using a fixed effects model and a fixed effect two-stage least squares model, this study exploits variations in fertility and in human capital formation across regions in Korea over the period 1970 to 2010. This analysis finds a virtuous cycle, where technological progress increased the demand for human capital, leading to an increase in the level of education and, in turn, to a demographic transition. This establishes the existence of a quantity-quality tradeoff on the Korean development path.
    Keywords: Demographic transition,Quantity-quality trade-off,Malthusian stagnation,Unified Growth Theory
    JEL: I25 J13 N15
    Date: 2014
  13. By: Juan M. Villa
    Abstract: Abstract Within social protection, antipoverty transfer programmes have significantly emerged in developing countries since the late 1990s. The effects of long-term participation and the assessment of the response of children's human capital formation to different levels of exposure are still unclear. This paper initially takes into consideration the Baland and Robinson (2000) human capital investment model to look into the economics of the length of exposure to antipoverty transfers. The model is presented in a framework shaped by the participation of households in a human development conditional cash transfer programme (CCT). An empirical contribution is made by estimating a dose-response function following Hirano and Imbens (2004). In this empirical setting, the length of exposure to Colombia's Familias en Accion CCT programme is employed as a continuous treatment affecting parental investment in children's human capital. The theoretical and empirical results show that a longer exposure to antipoverty programmes leads to a higher accumulation of years of education and school registration rates.
    Date: 2014
  14. By: David Atkin; Amit K. Khandelwal; Adam Osman
    Abstract: We conduct a randomized control trial that generates exogenous variation in the access to foreign markets for rug producers in Egypt. Combined with detailed survey data, we causally identify the impact of exporting on firm performance. Treatment firms report 15-25 percent higher profits and exhibit large improvements in quality alongside reductions in output per hour relative to control firms. These findings do not simply reflect firms being offered higher margins to manufacture high-quality products that take longer to produce. Instead, we find evidence of learning-by-exporting whereby exporting improves technical efficiency. First, treatment firms have higher productivity and quality after accounting for rug specifications. Second, when asked to produce an identical domestic rug using the same inputs, treatment firms receive higher quality assessments despite no difference in production time. Third, treatment firms exhibit learning curves over time. Finally, we document knowledge transfers with quality increasing most along the specific dimensions that the knowledge pertained to.
    JEL: F10
    Date: 2014–11
  15. By: René Böheim; Thomas Horvath; Karin Mayr
    Abstract: We determine workforce composition and wages in firms in the presence of productivity spill-overs between co-workers. In equilibrium, workers' wages depend on the production struc- ture of firms, own group size, and aggregate workforce composition in the firm. We estimate the wage effects of workforce diversity and own group size by birthplace and the implied pro- duction structure in Austrian firms using a comprehensive matched employer-employee data set. In our data, we identify a positive effect of workforce diversity and a negative effect of own group size on wages, which suggest that workers of different birthplaces are complements in production on average.
    JEL: D21 D22 F22 J31
    Date: 2014–08
  16. By: Silves J.C. Moreira (Faculdade de Economia, Universidade do Porto); Pedro Cosme Vieira (Faculdade de Economia, Universidade do Porto); Aurora A.C. Teixeira (CEF.UP, Faculdade de Economia, Universidade do Porto; INESC TEC; OBEGEF)
    Abstract: Despite the importance of human capital stock to the economic growth of countries, its analysis has been restricted to more developed countries or to cross-country samples from a set of countries. Due to a lack of estimates for this variable in less developed countries, it has not been possible to assess the importance of this determinant for their growth and development. The aim of this study is to partly fill this gap, determining human capital stock in terms of average formal schooling for the Cape Verdean economy in the period 1950-2012. To this end, we resorted to an adaption of the methodology proposed by Barro and Lee (1993), based on past schooling values. We found that between 1950 and 2012 the Cape Verdean working-age population showed a gradual improvement in the levels of schooling, rising from 0.7 years of schooling in the 1950s to 5.4 in late 2012. However, this means that, in each year, the average years of schooling increased only 0.08 years, meaning that, in net terms and on average, only 7.6% of the working-age population was attending some level of formal education. The availability of a time series of number of average schooling years in Cape Verde opens up possibilities for assessing the impact of human capital on the country’s economic growth.
    Keywords: Human capital, measurement, economic growth, Cape Verde
    JEL: J24 I20 C19 O40
    Date: 2014–11
  17. By: Geiler, P.H.M. (Tilburg University, Center For Economic Research); Renneboog, L.D.R. (Tilburg University, Center For Economic Research)
    Abstract: We analyze the payout channel choice of listed UK firms and examine whether the choice between dividends, share repurchases, a combination of payout channels, or complete earnings retention is affected by investor sentiment, taxation, major shareholder ownership, and in particular the CEO’s compensation package. The payout choice can have an immediate effect on the value of the CEO’s stock options and restricted stock, whereby anticipated dividends drive down the value of her equity-based pay if it is not dividend-protected whereas share repurchases may have a positive impact. We use a quantile regression analysis to examine various payout scenarios as well as a nested logit model which studies payout choice conditional on changing payout levels. We find that it is the CEO’s personal wealth as reflected by her compensation package rather than shareholder preferences which has the strongest impact on the firm’s payout policy.
    Keywords: executive compensation; payout policy; dividends; share repurchases; market sentiment
    JEL: G30 G35 J33 M52
    Date: 2014
  18. By: Gil S. Epstein (Bar-Ilan University); Ira N. Gang
    Abstract: Donor aid organizations (DAOs) are multi-layered and multi-dimensional bureaucracies with many departments trying to find solutions to problems for countries, investing staff resources and effort into having an effect. A department may come into conflict with other departments because of personal and other rivalries, at least partly overlapping jurisdictions, and/or the bureaucratic necessity of laying claim to having the bigger impact. The idea here is that good governance starts at home. We consider how inter-departmental competition within the DAO affects departments’ efforts and the DAO’s performance measured by its ability to maximize effort towards helping a client country. In short, we wish to see how alternative reward systems which DAOs may put into place motivate competing departments in implementing the organization’s goals. The argument for establishing good governance criteria is as much to put constraints on donor behavior as on the necessity of properly acting recipients.
    Keywords: foreign aid, governance, rent seeking, decentralization
    JEL: O10 O19 F35
    Date: 2014–11
  19. By: Stephan Humpert (Federal Office for Migration and Refugees, Nuremberg, Germany; Leuphana University Lueneburg, Germany)
    Abstract: Using three different measures for satisfaction, I investigate gender-specific differences in working time mismatch. While male satisfaction with life or job is slightly not effected by working more or less hours, only over-time lowers male work life balance significantly. Women are more sensitive to the amount of working hours. They prefer part-time employment and are dissatisfied with both changes towards over-time and under-time.
    Keywords: Working Hours, Gender Differences, Work Life Balance, European Social Survey (ESS 2012)
    JEL: J22 I31 J16
    Date: 2014–09
  20. By: Hanushek, Eric A.; Piopiunik, Marc; Wiederhold, Simon
    Abstract: Differences in teacher quality are commonly cited as a key determinant of the huge international student performance gaps. However, convincing evidence on this relationship is still lacking, in part because it is unclear how to measure teacher quality consistently across countries. We use unique international assessment data to investigate the role of teacher cognitive skills as one main dimension of teacher quality in explaining student outcomes. Our main identification strategy exploits exogenous variation in teacher cognitive skills attributable to international differences in relative wages of nonteacher public sector employees. Using student-level test score data, we find that teacher cognitive skills are an important determinant of international differences in student performance. Results are supported by fixed-effects estimation that uses within-country between-subject variation in teacher skills.
    Keywords: teacher cognitive skills; student performance; instrumental variable; PIAAC; PISA
    JEL: I20 H40 H52
    Date: 2014
  21. By: Henri Busson
    Abstract: In the United States, regions with more human capital tend to attract skilled workers (e.g., see Glaeser and Berry, 2005), and as a result, convergence between regions does not occur (e.g., see Barro and Sala-i-Martin, 1992). Presently, many of the most productive European workers try to migrate to the United States. As a consequence, economic growth in Europe could be affected by such migrations (e.g., see G Saint Paul, 2008). Futhermore, Indian and Chinese entrepreneurs are recently coming back to their home countries despite higher wages in the United States. The main explanations are the lack of economic opportunities in the US and the costs of the labour force (e.g., see Saxenian et al., 2011). To comprehend these problems, we develop a theoretical Economic Geography model with heterogeneous skills for workers. It is an extension of Krugman's famous model "History versus expectations". This two regions model describes an economy with one input assuming two levels of skills for labor force, where workers have the opportunity to migrate. The question is whether history completely determines the final equilibrium or whether is it possible to attract skilled workers to areas with less human capital. This is a dynamic model, which is able to explain the location choices of workers between countries or within countries. The model could be extended to more complex new economic geography model with utility functions instead of wages (e.g., see Ottaviano, Tabuchi and Thisse, 2002). With the heterogeneity of workers, several equilibriums appear that were not present in Krugman's model. Dispersion of human capital is now a possibility where all the skilled workers are located in one area and all the unskilled workers are in the other region. Our results suggest that history does not determine the final outcome even with high interest rates conditional on economies scales that are sufficiently high contrary to Krugman. At least one equilibrium path emerges that was not present in Krugman's model. Under certain conditions, the final equilibrium is stable. This finding contradicts previous papers, which demonstrated that heterogeneity was a stabilizing force (e.g., see Morris and Shin, 2006; Herrendorf et al., 2000).
    Keywords: Economic geography; location choice; equilibrium paths; linear differential systems
    JEL: J61 C62 R12
    Date: 2014–11

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