nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2015‒04‒02
eight papers chosen by
Tommaso Reggiani
Universität zu Köln

  1. Gender and Dynamic Agency: Theory and Evidence on the Compensation of Top Executives By Stefania Albanesi; Claudia Olivetti; Maria Jose Prados
  2. How creative are you? An experimental study on self-selection in a competitive incentive scheme for creative performance By Bradler, Christiane
  3. Worker Morale and Effort: Is the Relationship Causal? By Hassink, Wolter; Fernandez, Roberto M.
  4. Missing at Work – Sickness-related Absence and Subsequent Job Mobility By Adrian Chadi; Laszlo Goerke
  5. From Learning to Knowing: A Psychological-Neurological Approach to Explain the Human Capital Formation Process By Tamilina, Larysa; Tamilina, Natalya
  6. The Effects of Introducing Mixed Payment Systems for Physicians – Experimental Evidence By Jeannette Brosig-Koch; Heike Hennig-Schmidt; Nadja Kairies-Schwarz; Daniel Wiesen
  7. Game, set, and match: Do women and men perform differently in competitive situations? By Michael Jetter; Jay K. Walker
  8. Bonus caps, deferrals and bankers' risk-taking By Jokivuolle, Esa; Keppo, Jussi; Yuan , Xuchuan

  1. By: Stefania Albanesi (Federal Reserve Bank of New York); Claudia Olivetti (Boston University and NBER); Maria Jose Prados (University of Southern California)
    Abstract: We document three new facts about gender differences in executive compensation. First, female executives receive lower share of incentive pay in total compensation relative to males. This difference accounts for 93% of the gender gap in total pay. Second, the compensation of female executives displays lower pay-performance sensitivity. A $1 million dollar increase in firm value generates a $17,150 increase in firm-specific wealth for male executives and a $1,670 increase for females. Third, female executives' compensation is more sensitive to bad firm performance and less sensitive to good firm performance. We find no link between firm performance and the gender of top executives. We discuss evidence on differences in preferences and the cost of managerial effort by gender and examine the resulting predictions for the structure of compensation. We consider two paradigms for the pay-setting process, the efficient contracting model and the "managerial power" or skimming view. The efficient contracting model can explain the first two facts. Only the skimming view is consistent with the third fact. This suggests that the gender differentials in executive compensation may be inefficient.
    Keywords: sensitivity, performance incentives, managerial power, skimming, efficient contracts
    JEL: J31 M12 J41
    Date: 2015–03
  2. By: Bradler, Christiane
    Abstract: Economic theory suggests that performance pay may serve as an effective screening device to attract productive agents. The existing evidence on the self-selection of agents is largely limited to job tasks where performance is driven by routine, well-defined procedures. This study presents evidence for a creative task and studies how agents self-select into a tournament-based scheme vs. a fixed pay scheme. The experiment allows for the measurement of creative productivity, risk preferences, self-assessments, gender, and other socio-economic characteristics such as the Big Five personality traits. Results show that the two payment schemes systematically attract agents with different characteristics. However, results differ fundamentally from previously found patterns. Agents did not self-select into the tournament scheme according to their creative productivity, but only according to their risk attitudes and self-assessments. The reason for the absence of a selection of the most creative agents into the tournament is that there exist substantial misjudgments of relative creative productivity. Further evidence from a representative German survey data set provides additional support for the experimental results suggesting external validity.
    Keywords: performance pay,tournaments,selection,sorting,creativity,experiment
    JEL: C91 D03 J33 M52
    Date: 2015
  3. By: Hassink, Wolter (Utrecht University); Fernandez, Roberto M. (MIT Sloan School of Management)
    Abstract: We investigate a unique setting which enables us to distinguish between two theories of work performance. A standard labor supply framework implies a negative effect of the non-pecuniary cost of work on the employee's effort. In contrast, a model of worker morale that is consistent with a widely used theory of Akerlof and Yellen (QJE,1990) predicts this negative effect is stronger (weaker) for low-morale (high-morale) workers. We exploit a natural experiment design of a firm relocation from Milwaukee's Central Business District to the area's suburban ring in 1992. Since the employees did not choose the location of the new plant, there is an exogenous source of variation on the adjusted commuting distance among those who stay at the firm. Some of the workers received a windfall gain, whereas other workers experienced an unforeseen cost in longer commuting time. The estimates indicate that low-morale workers are responsive to the shock in commuting time. We conclude that the results favor the model of worker morale.
    Keywords: natural experiment, absenteeism, worker morale
    JEL: J24 J31 M52
    Date: 2015–03
  4. By: Adrian Chadi (Institute for Labour Law and Industrial Relations in the EU, University of Trier); Laszlo Goerke (Institute for Labour Law and Industrial Relations in the EU, University of Trier)
    Abstract: Economists often interpret absenteeism as an indicator of effort. Using data from the German Socio-Economic Panel (SOEP) study, this paper offers a comprehensive discussion of this view by analysing various forms of job mobility. The evidence reveals a significantly negative (positive) link between sickness-related absence and the probability of a subsequent promotion (dismissal). In line with the interpretation of absenteeism as a proxy for effort, instrumental variable analyses suggest no causal impact of absence behaviour on the likelihood of such career events when variation in illness-related absence is triggered exogenously. We observe no consistent gender differences in the link between absence and subsequent career events.
    Keywords: dismissal, gender difference, German Socio-Economic Panel (SOEP), instrumental variables, job mobility, promotion, sickness-related absence
    JEL: J16 J22 J63 M51
    Date: 2015–03
  5. By: Tamilina, Larysa; Tamilina, Natalya
    Abstract: By drawing on neurological and psychological theories of learning, our study introduces a new conceptual framework to analyse the role learning plays in knowledge and skill acquisition. Learning is modelled through four mechanisms defined as individuals' participation in formal, non-formal, and informal learning, as well as learning-by-doing. Our analysis suggests heterogeneity in how various learning mechanisms affect individuals' overall stock of knowledge and skills. Additionally, the proposed analytical framework points to the existence of an optimal sequence in which different learning forms should be pursued in order to maximise overall stocks of human capital. These propositions are tested with the Adult Literacy and Life Skills Survey data (2003) utilising a variety of statistical techniques.
    Keywords: Lifelong learning, skill acquisition, neurology of learning, psychology of learning, economics of learning
    JEL: I21 J01 J24 J28 J88
    Date: 2013–05–01
  6. By: Jeannette Brosig-Koch; Heike Hennig-Schmidt; Nadja Kairies-Schwarz; Daniel Wiesen
    Abstract: Mixed payment systems have become a prominent alternative to paying physicians through fee-for-service and capitation. While theory shows mixed payment systems to be superior, empirically, causal effects on physicians’ behavior are not well understood when introducing mixed systems. We systematically analyze the influence of fee-for-service, capitation, and mixed payment systems on physicians’ service provision. In a controlled laboratory setting, we implement an exogenous variation of the payment method. Participants, in the role of physicians, in the lab (N=213) choose quantities of medical services affecting patients’ health outside the lab. Behavioral data reveal significant overprovision of medical services under fee-for-service and significant underprovision under capitation, though less than predicted when assuming profit-maximization. Introducing mixed payment systems significantly reduces deviations from patient-optimal treatment. Responses to incentive systems can be explained by a behavioral model capturing physician altruism. We find substantial heterogeneity in physician altruism. Our results hold for medical and non-medical students.
    Keywords: Fee-for-service; capitation; mixed payment systems; physician altruism; laboratory experiment
    JEL: C91 I11
    Date: 2015–02
  7. By: Michael Jetter; Jay K. Walker
    Abstract: This paper analyzes potential gender differences in competitive environments using a sample of over 100,000 professional tennis matches. Focusing on two phenomena of the labor and sports economics literature, we find robust evidence for (i) the hot-hand effect (an additional win in the most recent ten matches raises the likelihood of winning by 3.1 to 3.3 percent) and (ii) the clutch-player effect, as top players are excelling in Grand Slam tournaments, the most important events. Overall, we find virtually no gender differences for the hot-hand effect and only minor distinctions for the clutch-player effect.
    Keywords: gender gap; competition; hot hand; clutch player; tennis
    JEL: J24 L83 D84
    Date: 2015–03–17
  8. By: Jokivuolle, Esa (Bank of Finland Research); Keppo, Jussi (NUS Business School and Risk Management Institute National University of Singapore); Yuan , Xuchuan (Risk Management Institute National University of Singapore)
    Abstract: We model a banker's future bonuses as a series of call options on the bank's profits and show that bonus caps and deferrals reduce risk-taking. However, the banker's optimal risk-taking also depends on the costs of risk-taking. We calibrate the model to US banking data and show that lengthening the standard one-year bonus payment interval has no material impact, whereas capping the bonus at the level of the base salary substantially reduces the bankers’ risk-taking. Our results suggest that the European Union's bonus cap reduces risk-taking whereas bonus clawbacks as prescribed in the Dodd-Frank Act appear to be ineffective.
    Keywords: banking; bonuses; regulation; compensation; Dodd-Frank Act
    JEL: G01 G21 G28 J33 M52
    Date: 2015–03–04

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