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on Human Capital and Human Resource Management |
| By: | Joyee Deb (School of Management, Yale University); Jin Li (Kellogg School of Management, Northwestern University); Arijit Mukherjee (Dept. of Economics, Michigan State University) |
| Abstract: | We study optimal contracting in a setting where a firm repeatedly interacts with multiple workers, and can compensate them based on publicly available performance signals as well as privately reported peer evaluations. If the evaluation and the effort provision are done by different workers (as in a supervisor/agent hierarchy), we show that, using both the private and public signals, the first best can be achieved even in a static setting. However, if each worker is required to both exert effort and report on his co-worker’s performance (as in a team setting), the worker’s effort incentives cannot be decoupled from his truth-telling incentives. This makes the optimal static contract inefficient and relational contracts based on the public signals increase efficiency. In the optimal contract, it may be optimal to ignore signals that are informative of the worker’s effort. |
| Keywords: | Relational contracts, Subjective evaluation |
| JEL: | D82 D86 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1995&r=hrm |
| By: | Dalton, P.S. (Tilburg University, Center For Economic Research); Gonzalez Jimenez, V.H. (Tilburg University, Center For Economic Research); Noussair, C.N. (Tilburg University, Center For Economic Research) |
| Abstract: | Abstract: To boost employees’ performance, firms often offer monetary bonuses when production goals are reached. However, the evidence suggests that the particular level of a goal is critical to the effectiveness of this practice. Goals must be challenging yet achievable. Computing optimal goals when employees have private information about their own abilities is often not feasible for the firm. To solve this problem, we propose a compensation scheme in which workers set their own production goals. We provide a simple model of self-chosen goals and test its predictions in the laboratory. The evidence we<br/>find in the laboratory confirms our model’s predictions for men, but not for women. Men exert greater effort under the self-chosen goal contract system than under a piece rate contract. In contrast, women perform worse under the self-chosen goal contract. Further analysis suggests that this is because women fail to set goals that are challenging enough, because they are less likely to update their goals to take into account their improving performance as they repeat the task. |
| Keywords: | contracts; bonus; endogenous goals; productivity; intrinsic motivation; challenge seeking; gender differences |
| JEL: | C91 C92 J16 J24 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:35daceab-34bc-4bd2-b330-ec03da6b06b7&r=hrm |
| By: | Jocelyn Donze; Trude Gunnes |
| Abstract: | In this article, we propose to view the firm as a locus of socialization in which employees with heterogeneous work attitudes can be motivated and coordinated through adherence to a social ideal of effort. We develop an agency model in which employees have both a personal and a social ideal of effort. The firm does not observe the personal ideals, but can make its workforce more sensitive to the social ideal by fostering interaction in the workplace. We show that there are two reasons why the firm invests in social bonding. First, it reinforces the effectiveness of monetary incentives. Second, strengthening the social ideal reduces the adverse selection problem and the need to devise distorted payment schemes. We also show that the firm allocates more time to social interaction when personal ideals of effort are low or heterogeneous. |
| Keywords: | agency theory, social interaction, social norms, norm regulation. |
| JEL: | D2 D8 J3 M5 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2015-09&r=hrm |
| By: | Arshad Ali Bhatti; M. Emranul Haque; Denise R. Osborn |
| Abstract: | This paper explores the relationship between inequality and growth in the context of a unified empirical approach suggested by the theoretical model of Galor and Moav (2004). Based on the model’s prediction, we construct a measure of human capital-to-physical capital ratio in order to investigate the threshold effects of inequality on economic growth. Using data of 82 countries for the period 1965–2003, our results are twofold: first, there exist significant thresholds of human-to-physical capital ratio below which the effect of inequality on growth is positive, whereas it is negative above it; second, human capital drives growth only when the human-to-physical capital ratio is above its threshold level. Our results are generally robust to using different measures of human capital and different data on inequality. These results are consistent with the predictions of Galor and Moav (2004). |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:man:cgbcrp:205&r=hrm |
| By: | Elwyn Davies; Marcel Fafchamps |
| Abstract: | This paper uses experimental methods to study the impact of limited enforcement and reputation on employer-worker relations in labour markets in Ghana. Participants, students recruited from universities in Accra, Ghana are designated as either employers or workers and play a gift-exchange game on a tablet computer. In this game, employers make wage offers to workers, who can then choose to accept or reject and, after accepting, what effort level to exert. Five treatments were used to assess the impact of limited enforcement, competition between employers and reputation. Each participants plays four games, consisting of five trading periods. We find different results from earlier experiments in developed countries: while these experiments have found strong evidence for relational contracting and conditional reciprocity, we do not find evidence for this. We find that a subgroup of workers exerts very low effort levels, but that this low effort of the workers is not punished by employers, who are not responsive in their wage offers to what the workers did previously. As a result, on average, the workers capture most of the profits. Introducing competition or a multilateral reputation mechanism does not significantly improve this. |
| Keywords: | Relational contracting, conditional reciprocity, gift-exchange game, punishment strategies, Ghana |
| JEL: | C71 D2 D86 E24 O16 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:csa:wpaper:2015-08&r=hrm |
| By: | Philippe Aghion; Ernst Fehr; Richard Holden; Tom Wilkening |
| Abstract: | In this paper we conduct a laboratory experiment to test the extent to which Moore and Repullo's subgame perfect implementation mechanism induces truth-telling in practice, both in a setting with perfect information and in a setting where buyers and sellers face a small amount of uncertainty regarding the good's value. We find that Moore-Repullo mechanisms fail to implement truth-telling in a substantial number of cases even under perfect information about the valuation of the good. This failure to implement truthtelling is due to beliefs about the irrationality of one's trading partner. Therefore, although the mechanism should - in theory - provide incentives for truth-telling, many buyers in fact believe that they can increase their expected monetary payoff by lying. The deviations from truth-telling become significantly more frequent and more persistent when agents face small amounts of uncertainty regarding the good's value. Our results thus suggest that both beliefs about irrational play and small amounts of uncertainty about valuations may constitute important reasons for the absence of Moore-Repullo mechanisms in practice. |
| Keywords: | Implementation theory, incomplete contracts, experiments |
| JEL: | D23 D71 D86 C92 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:189&r=hrm |
| By: | Carpenter, Jeffrey P. (Middlebury College); Matthews, Peter Hans (Middlebury College) |
| Abstract: | There has been little systematic study of the mechanisms typically used to raise money for charity. One of the most common is the simple raffle in which participants purchase chances to win a prize at a constant price. We conduct a field experiment randomly assigning participants to four raffle treatments to examine the effectiveness of alternative incentive schemes designed to encourage either participation or volume. Our results confirm the importance of incentives in that we find revenue gains are available on both margins. Our experiment, and others like it, illustrates the power of field experiments to inform fundraising choices. |
| Keywords: | philanthropy, fundraising, incentives, public good, raffle, Tullock contest, field experiment |
| JEL: | H41 D03 D64 C93 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8952&r=hrm |
| By: | Eduardo Zilberman (Department of Economics PUC-Rio); Pedro Hemsley (Department of Economics UERJ) |
| Abstract: | In an endowment economy in which agents negotiate long-term contracts with a financial intermediary, we study the implication of the interaction between incentive compatibility and participation constraints for risk sharing. In particular, we assume that after a default episode, agents consume their endowment and remain in autarky forever. Theoretically, we show that in autarky, the principal cannot spread continuation values to provide incentives except for the agent that draws the highest realization of the endowment. If the probability of such event is small enough then autarky is a persistent state. Numerically, we explore this implication to argue that the optimal contract prevents agents from reaching autarky when the probability of drawing the highest realization of the endowment is small enough. |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:rio:texdis:635&r=hrm |
| By: | Green, Colin P. (Lancaster University); Lozano, Fernando A. (Pomona College); Simmons, Rob (Lancaster University) |
| Abstract: | We analyse how a change in the probability of winning a tournament affects an agent's effort using the qualification rules for entry into the group and playoff stages of the UEFA Champions' League. Our results suggest that increasing the number of slots that a national league gets in the Champions' League leads to increases in investment in talent ex ante. This effect is largest among the teams that in the previous season just failed to qualify. This suggests that changes in prize structure leads to changes in investment decisions amongst those clubs most affected at the margin. However, we also find that incumbent teams that have already qualified for the Champions' League simultaneously raise their efforts, consistent with the occurrence of an arms race among top European football teams. |
| Keywords: | tournaments, UEFA Champions League |
| JEL: | M5 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8950&r=hrm |
| By: | Malhotra, Pearl; Singh, Manjari |
| Abstract: | This paper looks at a conceptual model depicting the impact of high performing Team Leaders (TL) on their team members’ career advancement. Certain inherent factors present in high performing TLs are not usually linked to either the development or the career advancement of the team members; however their presence ensures that there is a positive impact. For this study those factors were classified into two main categories – a) Human Capital and b) Social capital. Using Social Learning Theory, one can say that high performing TLs provide modelling stimuli based on live experiences to their team members. Social modelling and learning in this context can further be understood using Social Network Theory. This impact is positively moderated by the strength of the TL-team member dyads, which can be theoretically examined through Leader-Membership exchange and supervisory support. |
| URL: | http://d.repec.org/n?u=RePEc:iim:iimawp:13333&r=hrm |
| By: | Borisov, Alexander; Ellul, Andrew; Sevilir, Merih |
| Abstract: | This paper investigates the importance of accessing public capital markets through an initial public offering (IPO), and the consequent relaxation of firms’ financial constraints, for firm-level long term employment decisions. We find that firms significantly increase post-IPO investment in human capital compared to the pre-IPO stage. To address endogeneity concerns, we use a novel dataset of private firms and compare employment growth of IPO firms with two different control groups: First, private firms that file for an IPO but eventually withdraw their offering due to exogenous market conditions, and second, a propensity score matched sample of private firms that never file for an IPO. Firms that complete the IPO process experience higher employment growth in the post-IPO period relative to each control group. Importantly, our results show that the most likely channel for the realization of higher employment growth is the relaxation of financial constraints, allowing the newly public firms to access both equity and debt markets for funding investment in human capital, and not only capital expansion. Overall, our results highlight the importance of public capital markets for job creation over long term horizons. |
| Keywords: | Corporate growth; Employment growth; Financial constraints; Human capital; IPOs |
| JEL: | G32 G34 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10521&r=hrm |
| By: | Carneiro, Pedro (University College London); Koussihouèdé, Oswald (University Gaston Berger); Lahire, Nathalie (World Bank); Meghir, Costas (Yale University); Mommaerts, Corina (Yale University) |
| Abstract: | The impact of school resources on the quality of education in developing countries may depend crucially on whether resources are targeted efficiently. In this paper we use a randomized experiment to analyze the impact of a school grants program in Senegal, which decentralized a portion of the country's education budget. We find large positive effects on test scores at younger grades that persist at least two years. We show that these effects are concentrated among schools that focused funds on human resources improvements rather than school materials, suggesting that teachers and principals may be a central determinant of school quality. |
| Keywords: | quality of education, decentralization, school resources, child development, clustered randomized control trials |
| JEL: | H52 I20 I22 I25 O15 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8960&r=hrm |
| By: | Graetz, Georg (Uppsala University); Michaels, Guy (London School of Economics) |
| Abstract: | Despite ubiquitous discussions of robots' potential impact, there is almost no systematic empirical evidence on their economic effects. In this paper we analyze for the first time the economic impact of industrial robots, using new data on a panel of industries in 17 countries from 1993-2007. We find that industrial robots increased both labor productivity and value added. Our panel identification is robust to numerous controls, and we find similar results instrumenting increased robot use with a measure of workers' replaceability by robots, which is based on the tasks prevalent in industries before robots were widely employed. We calculate that the increased use of robots raised countries' average growth rates by about 0.37 percentage points. We also find that robots increased both wages and total factor productivity. While robots had no significant effect on total hours worked, there is some evidence that they reduced the hours of both low-skilled and middle-skilled workers. |
| Keywords: | robots, productivity, technological change |
| JEL: | E23 J23 O30 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8938&r=hrm |