nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2015‒02‒11
23 papers chosen by
Tommaso Reggiani
Universität zu Köln

  1. Communication and Trust in Principal-Team Relationships: Experimental Evidence By Kleine, Marco; Kube, Sebastian
  2. Positive employee attitudes: how much human resource management do you need? By Michael White; Alex Bryson
  3. Who posts performance bonds and why?: evidence from China's CEOs By Alex Bryson; John Forth; Minghai Zhou
  4. Do temporary agency workers affect workplace performance? By Alex Bryson
  5. Ambiguous Incentives and the Persistence of Effort : Experimental Evidence By Robin M. Hogarth; Marie Claire Villeval
  6. Managing the family firm: evidence from CEOs at work By Oriana Bandiera; Raffaella Sadun
  7. The new empirical economics of management By Nicholas Bloom; Raffaella Sadun; Renata Lemos; Daniela Scur; John Van Reenen
  8. Motivation and Incentives in Education: Evidence from a Summer Reading Experiment By Jonathan Guryan; James S. Kim; Kyung Park
  9. Principal-Agent Settings with Random Shocks By Rubin, Jared; Sheremeta, Roman
  10. Incomplete contracts and the internal organisation of firms By Philippe Aghion; John Van Reenen; Nicholas Bloom
  11. Performance pay: trends and consequences introduction By Keith A. Bender; Alex Bryson
  12. The Long Run Human Capital and Economic Consequences of High-Stakes Examinations By Ebenstein, Avraham; Lavy, Victor; Roth, Sefi
  13. Integrating Human Capital and Human Capabilities in Understanding the Value of Education By Chiappero-Martinetti, Enrica; Sabadash, Anna
  14. Pass/Fail, A-F, or 0-100? - Optimal Grading of Eager Students By Lilo Wagner
  15. Same or different? the CEO labour market in China's public listed companies By Alex Bryson; John Forth; Minghai Zhou
  16. The role of leader support in facilitating proactive work behaviour: a perspective from attachment theory By Chia-Huei Wu; Sharon K. Parker
  17. Human capital and growth in japan since 1970: converging to the steady state in a 1% world By Theodore R. Breton
  18. Human resources, physical resources and economic development: A foundation of human resource economics By Furuoka, Fumitaka
  19. Ambition, human capital acquisition and the metropolitan escalator By Ian R. Gordon
  20. Making do with less: working harder during recessions By Edward P. Lazear; Kathryn L. Shaw; Christopher Stanton
  21. Worktime regulations and spousal labor supply By Dominique Goux; Eric Maurin; Barbara Petrongolo
  22. (Why) Are Internal Labor Markets Active in French Business Groups? By Giacinta Cestone; Chiara Fumagalli; Francis Kramaz; Giovanni Pica
  23. Separate and Unequal in the Labor Market: Human Capital and the Jim Crow Wage Gap By Celeste K. Carruthers; Marianne H. Wanamaker

  1. By: Kleine, Marco (Max Planck Institute for Innovation and Competition); Kube, Sebastian (University of Bonn)
    Abstract: We study how upward communication – from workers to managers – about individual efforts affects the effectiveness of gift exchange as a contract-enforcement device for work teams. Our findings suggest that the use of such self-assessments can be detrimental to workers' performance. In the controlled environment of a laboratory gift-exchange experiment, our workers regularly overstate their own contribution to the joint team output. Misreporting seems to spread distrust within the team of workers, as well as between managers and workers. This manifests itself in managers being less generous with workers' payments, and in workers being more sensitive to the perceived kindness of their relative wage payments. By varying the source and degree of information about individual efforts between treatments, we see that precise knowledge about workers' actual contributions to the team output is beneficial for the success of gift-exchange relationships. Yet, workers' self-assessments can be a problematic tool to gather this information.
    Keywords: communication, gift exchange, incomplete contracts, reciprocity, performance appraisal, self-assessment, work team, laboratory experiment
    JEL: C92 J33 M52
    Date: 2015–01
  2. By: Michael White; Alex Bryson
    Abstract: We propose a selective view of human resource management (HRM) that is guided by work motivation theory, arguing that one of the means by which firms achieve higher performance is by investing in certain forms of HRM practice that help fulfil intrinsic work values and thereby influence employees’ attitudes to their jobs and to the firm in a positive direction. Additionally, an accumulation of complementary practices has important communicative functions that intensify positive employee attitudes. Using nationally representative linked employer–employee data for Britain, we investigate the strength and form of the association between the array of practices deployed by the workplace on one hand, and organizational commitment (OC) and intrinsic job satisfaction (IJS) on the other – two types of job attitude that research has shown to be related to a range of performance measures. We find strong evidence that the relationship between employee job attitudes and our measure of HRM is non-linear, rising chiefly at higher levels of HRM. Results are robust to altered composition of the HRM index. Higher OC and IJS emerge at HRM intensity values which are attained by roughly half the British population of workplaces.
    Keywords: human resource management; high performance; organizational commitment; intrinsic job satisfaction
    JEL: J28 L23 M12 M54
    Date: 2013–03–23
  3. By: Alex Bryson; John Forth; Minghai Zhou
    Abstract: Despite their theoretical value in tackling principal–agent problems at low cost to firms there is almost no empirical literature on the prevalence and correlates of performance bonds posted by corporate executives. We show that they are an important feature in today's CEO labour market in China: around one-tenth of corporations deploy performance bonds and they are equivalent to around 14% of CEO cash compensation. Consistent with principal–agent theory bonds are negatively associated with firm sales volatility. The complementarity between bonds and other incentive mechanisms such as bonuses and stock holding is consistent with optimal reward structures for multi-tasking agents. Those CEOs posting bonds are higher in the Communist Party ranks, were promoted via tournaments, and run larger firms, findings consistent with using bonds as an incentive to attract and retain the most able workers. Although state-owned enterprises are just as likely as privately owned ones to use bonds in CEO contracts, some of the theoretical predictions which assume profit-maximising firms do not hold where the state has an ownership stake.
    Keywords: performance bonds; security deposits; executive compensation; state-ownership; agency theory
    JEL: G34 J31 J33 M12 M52 O16 P31
    Date: 2014–09
  4. By: Alex Bryson
    Abstract: Using nationally representative workplace data we find the use of temporary agency workers (TAW) is positively associated with financial performance in the British private sector and weakly associated with higher sales per employee. However TAW is not associated with value added per employee. Employees in workplaces with TAW receive higher wages than observationally equivalent employees in non-TAW workplaces. But the presence of TAW in the employee’s occupation is associated with lower wages for employees in that occupation. Furthermore, conditioning on wages, the presence of TAW at the workplace is associated with lower job satisfaction and higher job anxiety among employees. These findings are consistent with TAW having an adverse effect on employees’ experiences at work, perhaps due a more labour intensive regime, one which is only partly compensated for with higher wages.
    Keywords: temporary agency workers; labour productivity; financial performance; worker wellbeing
    JEL: J50 L22 L23 L24
    Date: 2013–04
  5. By: Robin M. Hogarth (Department of Economics and Business, Universitat Pompeu Fabra and Barcelona Graduate School of Economics, Ramon Trias Fargas, 25–27, 08005 Barcelona, Spain); Marie Claire Villeval (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France)
    Abstract: When the assignment of incentives is uncertain, we study how the regularity and frequency of rewards and risk attitudes influence participation and effort. We contrast three incentive schemes in a real-effort experiment in which individuals decide when to quit : a continuous incentive scheme and two intermittent ones, fixed and random. In all treatments, we introduce a regime shift by withdrawing monetary rewards after the same unknown number of periods. In such an ambiguous environment, we show that less able and more risk averse players are less persistent in effort. Intermittent incentives lead to a greater persistence of effort, while continuous incentives entail exit as soon as payment stops. Randomness increases both earlier and later exiting. This selection effect in terms of ability and risk attitudes combined with the impact of intermittent rewards on persistence lead to an increase in mean performance after the regime shift when incentives are intermittent.
    Keywords: Incentives, intermittent reinforcement, randomness, effort, quitting, learning, experiment
    JEL: C92 D84 M54 J31
    Date: 2014
  6. By: Oriana Bandiera; 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.
    JEL: J1
    Date: 2013–12–03
  7. By: Nicholas Bloom; Raffaella Sadun; Renata Lemos; Daniela Scur; John Van Reenen
    Abstract: Over the last decade the World Management Survey (WMS) has collected firm-level management practices data across multiple sectors and countries. We developed the survey to try to explain the large and persistent TFP differences across firms and countries. This review paper discusses what has been learned empirically and theoretically from the WMS and other recent work on management practices. Our preliminary results suggest that about a quarter of cross-country and within-country TFP gaps can be accounted for by management practices. Management seems to matter both qualitatively and quantitatively. Competition, governance, human capital and informational frictions help account for the variation in management. We make some suggestions for both policy and future research.
    Keywords: management; organization; productivity
    JEL: J1
    Date: 2014–04
  8. By: Jonathan Guryan; James S. Kim; Kyung Park
    Abstract: For whom and under what conditions do incentives work in education? In the context of a summer reading program called Project READS, we test whether responsiveness to incentives is positively or negatively related to the student’s baseline level of motivation to read. Elementary school students were mailed books weekly during the summer, mailed books and also offered an incentive to read, or assigned to a control group. We find that students who were more motivated to read at baseline were more responsive to incentives, suggesting that incentives may not effectively target the students whose behavior they are intended to change.
    JEL: I21 J24
    Date: 2015–01
  9. By: Rubin, Jared; Sheremeta, Roman
    Abstract: Using a gift exchange experiment, we show that the ability of reciprocity to overcome incentive problems inherent in principal-agent settings is greatly reduced when the agent’s effort is distorted by random shocks and transmitted imperfectly to the principal. Specifically, we find that gift exchange contracts without shocks encourage effort and wages well above standard predictions. However, the introduction of random shocks reduces wages and effort, regardless of whether the shocks can be observed by the principal. Moreover, the introduction of shocks significantly reduces the probability of fulfilling the contract by the agent, the payoff of the principal, and total welfare. Therefore, our findings demonstrate that random shocks place an important bound on the ability of gift exchange to overcome principal-agent problems.
    Keywords: gift exchange, principal-agent model, contract theory, reciprocity, effort, shocks, laboratory experiment
    JEL: C72 C91 D63 D81 H50
    Date: 2015–02–05
  10. By: Philippe Aghion; John Van Reenen; Nicholas Bloom
    Abstract: We survey the theoretical and empirical literature on decentralization within firms. We first discuss how the concept of incomplete contracts shapes our views about the organization of decision-making within firms. We then overview the empirical evidence on the determinants of decentralization and on the effects of decentralization on firm performance. A number of factors highlighted in the theory are shown to be important in accounting for delegation, such as heterogeneity and congruence of preferences as proxied by trust. Empirically, competition, human capital and IT also appear to foster decentralization. There are substantial gaps between theoretical and empirical work and we suggest avenues for future research in bridging this gap.
    Keywords: uncertainty
    JEL: J1
    Date: 2013–03
  11. By: Keith A. Bender; Alex Bryson
    Abstract: From First Principles, one of the key implications of standard labour economic theory is that workers should be paid their marginal product. Pay that is tied to a worker’s performance, therefore, would seem to provide the most direct link to satisfy this theoretical requirement (Lazear, 1986). Indeed, there is ample evidence that indicates that implementing pay for performance increases productivity through a combination of increased incentives for high productivity and incentives for highly productive workers to sort themselves into these types of jobs (e.g., Lazear, 2000; Haley, 2003; Gielen et al., 2010; Jones et al., 2010 and Bryson et al., 2013). Because of these potentially beneficial attributes of performance-related pay, much research has been devoted to identifying how widespread the pay practice is compared with other methods of compensation, how it has changed over time, how it is viewed by different labour market actors and whether it correlates (positively or negatively) with other labour market outcomes, as well as a host of other research questions.
    JEL: N0 R14 J01
    Date: 2013–11
  12. By: Ebenstein, Avraham; Lavy, Victor; Roth, Sefi
    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 socioeconomic 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 highstakes examinations in university admissions.
    Date: 2014–12
  13. By: Chiappero-Martinetti, Enrica; Sabadash, Anna
    Abstract: The aim of this chapter is to investigate the possibility of combining human capital theory and the capability approach in order to better understand and measure both the instrumental and the intrinsic values of education for individuals, and to trace its relative spillover effects on societies. This chapter discusses a combined human capital - capability approach as a possibility for working with a broader information space in assessing the value of education. It presents three integrated sections discussing the role and value of education for human well-being. The first section reviews the most significant attempts to define and measure education from a human capital (HC) perspective. The second is focussed on education and human capabilities and considers those aspects and empirical facts that are not fully encompassed within or justified by the HC perspective. The third section argues that human capital and the capabilities paradigms can complement each other in measuring the value of education, and discusses some methodological challenges and empirical features associated with this combined view.
    Keywords: education; human capital; capabilties
    JEL: C81 D60 O15
    Date: 2014–07
  14. By: Lilo Wagner
    Abstract: This paper analyzes optimal grading in a world that focuses on top grades. Students choose an effort level, their performance is graded, and their grade correlates with their future income. Ex-ante, the policy maker chooses the optimal coarseness of the grading scale to maximize student welfare. When choosing their effort, students overweight outstanding { or salient { grades. I show that this behavior leads to excessive effort levels when grading is fully informative, and that coarse grading can be used to counterbalance incentives. Thus, salience can help explain why grading ranges from Pass/Fail scales (tenure decisions) via A-F-scales (school) to fully disclosing scores (e.g. SAT).
    Keywords: Optimal grading, effort incentives, salience theory, education
    JEL: D83 D81 I21
    Date: 2015
  15. By: Alex Bryson; John Forth; Minghai Zhou
    Abstract: Using linked employer-employee data for all China's public listed firms over the period 2001-10, we find top executive compensation exhibits many of the traits familiar in the Western literature, although sometimes in a more muted way, and with some clear exceptions. We also find a role for managerial power in executive pay setting which may reflect the recency of the stock market and regulations underpinning corporate governance. Nevertheless, there appear to be some elements of executive compensation which transcend national economic, political and cultural differences. The implication is that the Western model is not as idiosyncratic as critics suggest.
    JEL: O1
    Date: 2014
  16. By: Chia-Huei Wu; Sharon K. Parker
    Abstract: Researchers have proposed that leader support helps employees behave proactively at work. Leader support can facilitate the opportunities for employees to bring about change, as well as their motivation to do so. Nevertheless, empirical studies have shown mixed effects of leader support on employees’ proactive behavior. In this study, to reconcile the inconsistent findings on the impact of leader support on employees’ proactive behavior, the authors consider the content, mediating mechanisms, and boundary conditions of leader support in shaping employees’ proactive behavior. On the basis of attachment theory, the authors propose that secure-base support from leaders (support in the form of leader availability, encouragement, and noninterference) positively predicts employees’ proactive work behavior by increasing their role breadth self-efficacy and autonomous motivation. These hypotheses are supported in an online-survey sample from U.S. participants (N = 138) and a sample from a large gas and oil company in China (N = 212). The authors further propose that the beneficial effects of secure-base support from leaders are more prominent for individuals with lower attachment security. This hypothesis was also supported: Individuals high in attachment anxiety especially benefited from leader secure-base support in terms of its effect on role breadth self-efficacy; whereas those who are high in attachment avoidance especially benefited from leader secure-base support in terms of its effect on autonomous motivation. Our study helps explain how leaders’ support motivates employees’ proactive behavior, particularly for those individuals who have lower attachment security.
    JEL: J50
    Date: 2014–07–31
  17. By: Theodore R. Breton
    Abstract: Annual growth in GDP/adult in Japan has declined from over 10% in 1969 to an average of 1% since the financial crisis in 1991. I show that a dynamic Solow growth model, augmented with human capital, weekly labor-hours, and oil prices, explains Japan’s annual growth rates from 1969 to 2007 as conditional convergence to a steady-state rate of 1%/year. Each additional year of average adult schooling attainment raised GDP/adult directly and indirectly by 20 percent, and weekly hours worked had an output elasticity of 0.5. The marginal product of schooling was double the marginal product of physical capital.
    Keywords: Japan; Human Capital; Schooling; Productivity; Economic Growth; Convergence
    JEL: I25 O41 O53
    Date: 2014–11–20
  18. By: Furuoka, Fumitaka
    Abstract: Despite numerous studies on production inputs, such labour and capital, there is still a lack of systematic analysis on the crucial interaction between the human resources (HR) and physical resources (PR) in the process of economic development. Thus, the current paper aims to describe how these production resources would jointly determine the dynamics process of economic development. This holistic role of the HR in the economic development can be a foundation for the human resource economics.
    Keywords: Human resources, physical resources, economic development, human resource economics
    JEL: J24 O50
    Date: 2015
  19. By: Ian R. Gordon
    Abstract: This paper examines the relation between ambition, as a form of dynamic human capital, and the escalator role of high-order metropolitan regions, as originally identified by A. J. Fielding. It argues that occupational progression in such places particularly depends on concentrations both of people with more of this asset and of jobs offering preferential access to valued elements of tacit knowledge, interacting in thick, competitive labour markets. This is partially confirmed with analyses of British Household Panel Study (BHPS) data on long-term progression showing that only the more ambitious gain from residence in the extended London region, and that they only progress faster there.
    Keywords: escalator region; human capital; London; migration; social mobility; urban labour market
    JEL: J24 J61 J62 R23
    Date: 2013–06–10
  20. By: Edward P. Lazear; Kathryn L. Shaw; Christopher Stanton
    Abstract: Why did productivity rise during recent recessions? One possibility is that average worker quality increased. A second is that each incumbent worker produced more. The second effect is termed “making do with less.” Using data from 2006 to 2010 on individual worker productivity from a large firm, these effects can be measured and separated. For this firm, most of the gain in productivity during the recession was a result of increased effort. Additionally, the increase in effort is correlated with the increase in the local unemployment rate, presumably reflecting the costs of losing a job.
    JEL: N0 R14 J01 J50
    Date: 2014–06–05
  21. By: Dominique Goux; Eric Maurin; Barbara Petrongolo
    Abstract: We study interdependencies in spousal labor supply by exploiting the design of the French workweek reduction, which introduced exogenous variation in one's spouse's labor supply, at constant earnings. Treated employees work on average two hours less per week. Husbands of treated women respond by reducing their labor supply by about half an hour, consistent with substantial leisure complementarity, and specifically cut the non usual component of their workweek, leaving usual hours unchanged. Women's response to their husband's treatment is instead weak and rarely statistically significant, possibly due to heavier constraints in the organization of their workweek.
    JEL: J16 J22 K31
    Date: 2014–01
  22. By: Giacinta Cestone (Cass Business School, CSEF and ECGI); Chiara Fumagalli (Università Bocconi, CSEF and CEPR); Francis Kramaz (Crest, ENSAE and CEPR); Giovanni Pica (Università di Salerno, CSEF, Paolo Baffi Centre and Centro Luca D’Agliano)
    Abstract: Exploiting matched employer-employee data merged with information on the ownership structure of business groups, we document that French groups actively operate Internal Labor Markets (ILMs). For the average group-affiliated firm, the probability to absorb a worker previously employed in its same group exceeds by 9 percentage points the probability to absorb a worker employed outside the group. This average figure hides substantial heterogeneity: ILM activity is higher in more diversified groups, in groups experiencing plant/firm closures and is highest for high-skill occupations. We also find that closure events boost the proportion of separating workers redeployed to group affiliated partners (as opposed to external labor market partners) relative to normal times, i.e. more than 4 years before closure. Those episodes of closure spur ILM activity mainly for blue collar occupations. Overall, these findings suggest that groups respond to idiosyncratic shocks disproportionately relying on ILMs because they allow to save on search costs for human capital intensive occupations, while reducing firing costs for the more unionized occupational categories.
    Keywords: Internal Labor Markets, Business Groups, Job-to-Job Mobility
    Date: 2015–01–22
  23. By: Celeste K. Carruthers (Department of Economics, University of Tennessee); Marianne H. Wanamaker (Department of Economics, University of Tennessee)
    Abstract: We decompose the 1940 black-white earnings gap into that part attributable to differences in human capital and an unexplained portion that traces the upper bound of labor market discrimination. We find that differences in measurable human capital play a predominant role in determining 1940 wage and occupational status gaps. Our range of estimates for the unexplained gap, 11 to 17 log points, coincides with the higher end of the range of estimates from the post-Civil Rights era. We estimate that a counterfactual “separate but equal” school quality standard would have reduced wage inequalities by as much as 52 percent.
    Date: 2015–01

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