nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2015‒05‒30
fifteen papers chosen by
Tommaso Reggiani
Universität zu Köln

  1. Management Compensation, Monitoring and Aggressive Corporate Tax Planning By Melanie Steinhoff
  2. Do-gooders and go-getters: career incentives, selection, and performance in public service delivery By Nava Ashraf; Oriana Bandiera; Scott Lee
  3. Your Loss Is My Gain: A Recruitment Experiment With Framed Incentives By Jonathan de Quidt
  4. Regulating deferred incentive pay By Hoffmann, Florian; Inderst, Roman; Opp, Marcus
  5. The Cost of Job Loss By Burdett, Ken; Carrillo-Tudela, Carlos; Coles, Melvyn G.
  6. Optimal taxation and debt with uninsurable risks to human capital accumulation By Piero Gottardi; Atsushi Kajii; Tomoyuki Nakajima
  7. Human capital and long run economic growth : Evidence from the stock of human capital in England, 1300-1900 By de Pleijt, Alexandra M.
  8. Optimal Taxation and Human Capital Policies over the Life Cycle By Stefanie Stantcheva
  10. How Does Collective Reputation Affect Hiring? Selection and Sorting in an Online Labour Market By Guo Xu
  11. Politicians' promotion incentives and bank risk exposure in China By Wang, Li; Menkhoff, Lukas; Schröder, Michael; Xu, Xian
  12. Firms and skills: the evolution of worker sorting By Håkanson, Christina; Lindqvist, Erik; Vlachos, Jonas
  13. Engineering an incentive to search for work: A comparison groups approach By Stark, Oded; Jakubek, Marcin; Kobus, Martina
  14. Incentives to patients versus incentives to health care providers: The users’ perspective By Izabela Jelovac; Philippe Polomé
  15. Talent workers as entrepreneurs: a new approach to aspirational self-employment By Joanna Tyrowicz; Barbara Liberda; Magdalena Smyk

  1. By: Melanie Steinhoff
    Abstract: The empirical literature shows that management incentives often reduce corporate tax aggressiveness. Focussing on the riskiness of tax aggressiveness this paper offers one explanation for the observed negative relation. Using an agency framework, I analyze the manager's choice of effort dedication in other tasks and her explicit choice of the firm's tax risk. I show that corporate tax aggressiveness may decrease with compensation incentives. By choosing the tax risk, the manager (partly) determines her compensation risk. When the manager is assumed to be risk averse, an increase in compensation incentives motivates her to reduce her compensation risk through a less aggressive tax planning strategy. Further, a good governance structure may mitigate this effect of incentive compensation when marginal returns for tax planning are sufficiently low. I also demonstrate that the tax deductibility of performance-based pay yields less aggressive tax planning.
    Keywords: management incentives, hidden action, corporate tax planning
    JEL: H25 D82 D21
    Date: 2015–05
  2. By: Nava Ashraf; Oriana Bandiera; Scott Lee
    Abstract: We study how career incentives affect who selects into public health jobs and, through selection, their performance while in service. We collaborate with the Government of Zambia to experimentally vary the salience of career vs. social benefits of a newly created health worker position when recruiting agents nationally. We follow the entire first cohort from application to performance in the field and measure impacts at every stage. We find that making career incentives salient attracts more qualified applicants with stronger career ambitions without displacing pro-social preferences, which are high in both treatments. Health workers attracted by career incentives are more effective at delivering health services and are equally likely to remain in their posts over the course of 18 months. Career incentives, far from selecting the "wrong" types, attract talented workers who deliver health services effectively.
    Date: 2014–07
  3. By: Jonathan de Quidt
    Abstract: Empirically, labor contracts that financially penalize failure induce higher effort provision than economically identical contracts presented as paying a bonus for success, an effect attributed to loss aversion. This is puzzling, as penalties are infrequently used in practice. The most obvious explanation is selection: loss averse agents are unwilling to accept such contracts. I formalize this intuition, then run an experiment to test it. Surprisingly, I find that workers were 25 percent more likely to accept penalty contracts, with no evidence of adverse or advantageous selection. Consistent with the existing literature, penalty contracts also increased performance on the job by 0.2 standard deviations. I outline extensions to the basic theory that are consistent with the main results, but argue that more research is needed on the long-term effects of penalty contracts if we want to understand why firms seem unwilling to use them.
    Keywords: loss aversion, reference points, framing, selection, Mechanical Turk
    JEL: D03 J41 D86
    Date: 2014–04
  4. By: Hoffmann, Florian; Inderst, Roman; Opp, Marcus
    Abstract: Our paper evaluates recent regulatory proposals mandating the deferral of bonus payments and claw-back clauses in the financial sector. We study a broadly applicable principal agent setting, in which the agent exerts effort for an immediately observable task (acquisition) and a task for which information is only gradually available over time (diligence). Optimal compensation contracts trade off the cost and benefit of delay resulting from agent impatience and the informational gain. Mandatory deferral may increase or decrease equilibrium diligence depending on the importance of the acquisition task. We provide concrete conditions on economic primitives that make mandatory deferral socially (un)desirable.
    Keywords: financial regulation,compensation design,principal-agent models
    JEL: G28 G21 D86
    Date: 2015
  5. By: Burdett, Ken; Carrillo-Tudela, Carlos; Coles, Melvyn G.
    Abstract: In this paper we develop and quantitatively assess a tractable equilibrium search model of the labour market to analyse the long-term wage costs of a job loss. In our framework, these costs occur due to losses in workers' human capital and firm specific compensation, interruptions to workers' on-the-job search and due to turnover heterogeneity. A key feature is that firms post wage-tenure contracts as an optimal response to their employees' search behaviour and human capital accumulation. We estimate the wage losses due to job separation for young workers in the UK and show that our calibrated model fits the observed patterns very well. We use the model to evaluate the importance of each of the components that affect the cost of job loss. Human capital losses exert a strong negative and permanent effect on future wages. The effects of workers' on-the-job search and firms' tenure contracts, although temporary and smaller in size, are long-lasting. It takes workers around 10 years to recover wages through these channels. Human capital losses play a more important role in explaining the extent and persistence of wage losses among low skilled workers. Among high skilled workers, on-the-job search implies re-employment wages start recovering sooner.
    Date: 2015–05–26
  6. By: Piero Gottardi (European University Institute); Atsushi Kajii (Kyoto University and Singapore Management University); Tomoyuki Nakajima (Kyoto University and CIGS)
    Abstract: We consider an economy where individuals face uninsurable risks to their human capital accumulation, and analyze the optimal level of linear taxes on capital and labor income together with the optimal path of government debt. We show that in the presence of such risks it is beneficial to tax both labor and capital and to issue public debt. We also assess the quantitative importance of these findings, and show that the benefits of government debt and capital taxes both increase with the magnitude of idiosyncratic risks and the degree of relative risk aversion.
    Keywords: incomplete markets; Ramsey equilibrium; optimal taxation; optimal public debt.
    JEL: D52 D60 D90 E20 E62 H21 O40
    Date: 2015–03
  7. By: de Pleijt, Alexandra M. (Utrecht University)
    Abstract: Did human capital contribute to economic growth in England? In this paper the stock of total years of schooling present in the population between 1300 and 1900 is quantified. The stock incorporates extensive source material on literacy rates, the number of primary and secondary schools and enrolment figures. The trends in the data suggest that, whilst human capital facilitated pre-industrial economic development, it had no role to play during the Industrial Revolution itself: there was a strong decline in educational attainment between ca. 1750 and 1830. A time series analysis has been carried out that confirms this conclusion.
    Keywords: Human capital ; Industrial Revolution ; economic growth ; England JEL classification: N10 ; N30 ; O47 ; O57
    Date: 2015
  8. By: Stefanie Stantcheva
    Abstract: This paper derives optimal income tax and human capital policies in a dynamic life cycle model of labor supply and risky human capital formation. The wage is a function of both stochastic, persistent, and exogenous "ability'' and endogenous human capital. Human capital is acquired throughout life through monetary expenses. The government faces asymmetric information regarding the initial ability of agents and the lifetime evolution of ability, as well as the labor supply. The optimal subsidy on human capital expenses is determined by three considerations: counterbalancing distortions to human capital investment from the taxation of wage and capital income, encouraging labor supply, and providing insurance against adverse draws from the productivity distribution. When the wage elasticity with respect to ability is increasing in human capital, the optimal subsidy involves less than full deductibility of human capital expenses on the tax base, and falls with age. I consider two ways to implement the optimum: income contingent loans, and a tax scheme that allows for a deferred deductibility of human capital expenses. Numerical results are presented that suggest that full dynamic risk-adjusted deductibility of expenses might be close to optimal, and that simple linear age-dependent policies can achieve most of the welfare gain from the second best.
    JEL: H21 H23 I21 I22 I24
    Date: 2015–05
  9. By: Harish kumar
    Abstract: Work and life are two sides of a coin. They are interwoven in nature and overlap. An emotionally intelligent employee well knows how to strike balance between work and life, still lot of support is needed from top management/employers. Business organizations in India still have a long way to go so far as the espousal of WLB practices is concerned. In India, the private sector organizations have an edge over public sector organizations in name of WLB. Organizations, which attach adequate value to organizational learning, deliberately devise a well meditated training strategy. Some of the organizations resort to training exercise in a less formal manner. Training can modify the attitude of employers as well as employees towards WLB. As it is an established fact that employer and employees both are equally responsible for promoting the WLB initiatives in an organization, training can encourage both of them to be WLB conscious. Key words: Work Life Balance, Training, Interplay, Stress, Parenting
    Date: 2014–06
  10. By: Guo Xu
    Abstract: How does collective reputation affect hiring and selection into jobs? Using detailed hiring data from a global online labour market, where the country of residence is the salient group characteristic, we document a mechanism through which collective reputation can perpetuate initial group inequality. Using an instrumental variable strategy, we first identify reputational externalities between an employer's very first hire and the propensity to contract more workers from the same country. Employers, contingent on their first worker's performance (as measured by a public rating), go on to almost exclusively hire from the same country. This coincides with a strong and positive supply-side sorting response: Observing their predecessor's success, workers from the same country are more likely to apply and tend to be of higher quality. Employers, facing better applicants, are in turn more likely to continue providing top ratings for later hires from the first hire country. Collective reputation hence appears to serve as a coordination device that enables workers to positively sort with employers: Good workers then attract more good workers from the same country and vice versa.
    JEL: J7 J16 L14
    Date: 2015–05
  11. By: Wang, Li; Menkhoff, Lukas; Schröder, Michael; Xu, Xian
    Abstract: This paper shows that politicians' pressure to climb the career ladder increases bank risk exposure in their region. Chinese local politicians are set growth targets in their region that are relative to each other. Growth is stimulated by debt-financed programs which are mainly financed via bank loans. The stronger the performance incentive the riskier the respective local bank exposure becomes. This effect holds primarily for local banks which are under a certain degree of control of local politicians and it has increased with the release of recent stimulus packages requiring local co-financing.
    Keywords: Bank Lending,Bank Risk Exposure,Local Politicians,Promotion Incentives
    JEL: G21 G23 H74
    Date: 2015
  12. By: Håkanson, Christina (Sveriges riksbank); Lindqvist, Erik (Stockholm School of Economics); Vlachos, Jonas (Department of Economics, Stockholm University)
    Abstract: We document a significant increase in the sorting of workers by cognitive and non-cognitive skills across Swedish firms between 1986 and 2008. The weight of the evidence suggests that the increase in sorting is due to stronger complementarities between worker skills and technology. In particular, a large fraction of the increase can be explained by the expansion of the ICT sector and a reallocation of engineers across firms. We also find evidence of increasing assortative matching, in the sense that workers who are particularly skilled in their respective educational groups are more likely to work in the same firms. Changes in sorting pattens and skill gradients can account for a about half of their increase in between-firm dispersion.
    Keywords: Skill sorting; skilled-biased technological change; outsorcing; globalization; cognitive skills; non-cognitive skills; personality; employer-employee matched data
    JEL: J24 J62 L21 O33
    Date: 2015–05–20
  13. By: Stark, Oded; Jakubek, Marcin; Kobus, Martina
    Abstract: Social comparisons are important in the employment sphere. A “culture of unemployment” may evolve and prevail because it is optimal for an individual to remain unemployed when other unemployed individuals constitute his main reference group. We advance the idea that by making the receipt of unemployment benefits conditional on engagement in an incentive-enhancing activity (for example, work under state-sponsored employment schemes or participation in work-site-based training programs), a government can engineer a revision of the reference groups of an unemployed individual in order to induce him to seek work.
    Keywords: Unemployment benefits, Social comparisons, Relative deprivation, Labor and Human Capital, Public Economics, D04, D69, H53, J22, J64, J65,
    Date: 2015–05
  14. By: Izabela Jelovac (Université de Lyon, F-69007, France; CNRS, GATE Lyon St Etienne, 93, Chemin des Mouilles, F-69130, Ecully, France); Philippe Polomé (Université de Lyon, F-69007, France; CNRS, GATE Lyon St Etienne, 93, Chemin des Mouilles, F-69130, Ecully, France)
    Abstract: In theory, health care providers may adapt their professional behavior to the financial incentives driven by their remuneration. Our research question is whether the users of health care services anticipate such a behavior from their general practitioner (GP) and, if they do, what are the consequences of such an anticipation on their preferences regarding financial incentives. We propose a theoretical model to identify potential determinants of such preferences. We empirically test our theoretical predictions using the data from a survey that elicits individual preferences for either patients’ or providers’ hypothetical incentives in France. The empirical results confirm the theoretical ones by establishing that users tend to prefer to pay a copayment themselves when the amount of GPs’ incentives is high, the one of the patients’ copayment is low, they anticipate that their GP’s medical decisions are affected by financial incentives and their wealth is high. Otherwise, they prefer their GP to face financial incentives.
    Keywords: incentives, health care providers, patients, individual preferences
    JEL: I13 I18 J33
    Date: 2015
  15. By: Joanna Tyrowicz (Faculty of Economic Sciences, University of Warsaw; National Bank of Poland); Barbara Liberda (Faculty of Economic Sciences, University of Warsaw; National Bank of Poland); Magdalena Smyk (Faculty of Economic Sciences, University of Warsaw)
    Abstract: What is necessary to make entrepreneurship sector successful? It seems like two key factors in this matter are quantity of financial capital and quality of human capital. So far, studies on innovative firms were rather focused on spending on resources, and not on qualification of people who are entering entrepreneurship sector. Using concept of so-called talent workers (Hsieh et al. 2013) we check who is entering self-employment in Poland. Our question is whether people who enter self-employment are more likely to create successful businesses. The analysis is based on the labor force survey panel data for Poland for over a decade between 2001 and 2013. We found that talent workers were more likely to become self-employed in this period. Results are robust on two possibly confounding effects – within sector mobility and productivity of workers before entering self-employment.
    Keywords: self-employment, talent, labor force mobility, wage employment
    JEL: J62 J24
    Date: 2015

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