nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2015‒06‒13
fifteen papers chosen by
Tommaso Reggiani
Universität zu Köln

  1. Trade, Technologies, and the Evolution of Corporate Governance By Schymik, Jan Simon
  2. Management compensation, monitoring and aggressive corporate tax planning By Steinhoff, Melanie
  3. A Real-Effort Experiment on Gift Exchange with Temptation By Koch, Alexander K.; Nafziger, Julia
  4. Heterogeneous agents and decison making within firms By Hung, Chung-yu
  5. Generational Differences at Work in Spain By Lasierra, Jose Manuel; Molina, Jose Alberto; Ortega, Raquel
  6. How Large is the Stock Component of Human Capital? By Mark Huggett; Greg Kaplan
  7. Job satisfaction and motivation of public employees in Spain By Lasierra, Jose Manuel; Molina, Jose Alberto; Ortega, Raquel
  8. Competing with Superstars By Ammann, Manuel; Horsch, Philipp; Oesch, David
  9. Education and Growth with Learning by Doing By Marconi, Gabriele; de Grip, Andries
  10. Non-mandatory say on pay votes and AGM participation: Evidence from Germany By Powell, Daniel; Rapp, Marc Steffen
  11. Present-biased preferences and optimal compensation schedules: a note By Battisti, Michele
  12. Sorting into physician payment schemes: A laboratory experiment By Brosig-Koch, Jeannette; Kairies-Schwarz, Nadja; Kokot, Johanna
  13. The effects of introducing mixed payment systems for physicians: Experimental evidence By Brosig-Koch, Jeannette; Hennig-Schmidt, Heike; Kairies-Schwarz, Nadja; Wiesen, Daniel
  14. Can Helping the Sick Hurt the Able? Incentives, Information and Disruption in a Disability-Related Welfare Reform By Bagaria, Nitika; Petrongolo, Barbara; Van Reenen, John
  15. Incentives, Social Comparison Costs, and the Proximity of Envy's Object By Obloj , Tomasz; Zenger , Todd

  1. By: Schymik, Jan Simon
    Abstract: Do international trade and technological change influence how firms create incentives for human capital? I present a model that incorporates agency problems into a framework with firm heterogeneity and human capital. My model indicates that trade liberalizations and skill-biased technological change alter the way how the largest firms in an economy incentivize their managers. Increases in managerial reservation wages lead to a reduction in corporate governance investments and a rise in performance compensation since monitoring managers becomes less efficient. Using data on CEO compensation and entrenchment opportunities in public industrial firms in the U.S., I document strong empirical regularities in support of the model predictions. Firms allow for more managerial entrenchment and offer larger CEO compensation when their industries become more open to trade or when production becomes more I.T. intensive.
    Keywords: international trade and firm organization; agency problems in international trade; endogenous managerial entrenchment; corporate governance and CEO compensation
    JEL: F1 F16 G34 J33 L22 O33
    Date: 2015–06
  2. By: Steinhoff, Melanie
    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 ciently 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
  3. By: Koch, Alexander K. (Aarhus University); Nafziger, Julia (Aarhus University)
    Abstract: We conduct a real-effort experiment to test whether workers reciprocate generous wages by managers when workers are tempted to surf the internet. Further, we investigate how an active policy of restricting the usage of the internet affects the workers' motivation. We observe that the temptation of the internet hampers workers' willingness to reciprocate fair wages. Yet, when the manager makes an active choice not to deny internet access, workers perceive the "freedom from control" as a gift which they reciprocate with high effort. Whether the positive "freedom from control" aspect or the negative temptation aspect dominates depends on the worker's reciprocity: for highly reciprocal workers the control aspect dominates; for non-reciprocal workers the temptation aspect dominates.
    Keywords: gift exchange, temptation, hidden costs of control
    JEL: C91 D03 J33 M52
    Date: 2015–05
  4. By: Hung, Chung-yu (Tilburg University, School of Economics and Management)
    Abstract: This dissertation explores the implications of agents’ heterogeneity in decision making within situations where information is not completely contractible. Specifically, the study applies empirical methods across three chapters to examine the role of employees’ traits and their mutual relationships in decision making within firms. The first chapter investigates the association between managerial ability and managers’ discretionary bonus decisions using a dataset from a Chinese hospital and shows that more able managers keep a smaller bonus slice to themselves and make a lower degree of bonus differentials among the subordinates than less able managers.<br/>The second chapter analyzes data from a manufacturer in China that includes two work environments: (1) the LINE setting, with a production environment composed of stand-alone work stations and individual incentives, and (2) the GROUP setting, with joint team production and group incentives. Here, the research analyzes the effects of workforce homogeneity on employee learning and provision of effort, as well as whether the effects differ across the two settings. This chapter documents that workforce homogeneity decreases employee learning in the LINE setting, but improves learning in the GROUP setting. However, it does not find empirical evidence on employee effort provision. <br/>The final chapter explores how the working relationship between decision makers and information providers simultaneously affects information use and reporting through data on loan approval decisions in a car dealership in Taiwan, where the working relationship is shaped by whether information providers work either in a franchise or in a company outlet. The findings suggest that the close working relationship reduces biases in information use and reporting and results in a low default rate.<br/>
    Date: 2015
  5. By: Lasierra, Jose Manuel; Molina, Jose Alberto; Ortega, Raquel
    Abstract: The purpose of this paper is to explore differentials in the job satisfaction and the organizational commitment of Baby Boomers and Generation X. In light of multiple age segments in the workforce, and the ageing population, human resource management strategies aimed at attracting, engaging, and retaining employees of all ages are of strategic importance. Through the use of the large-scale Quality of Life at Work, 2006-2010 survey (Spain), we have carried out an empirical approach that points to real and significant differences between these two generations, with respect to wages, leisure time, co-worker relationships, occupations, and human relationships. The findings of our study suggest that management will increasingly be required to take the generational diversity of the workforce into account. The value of this paper is to show several marked differences between generation groups in the labour market and, subsequently, it concludes by considering the implications of our results for work management both in theory and in practice.
    Keywords: Generational groups, work organization, job satisfaction, employee commitment, human resources
    JEL: M12 M51 M54
    Date: 2015–06–03
  6. By: Mark Huggett; Greg Kaplan
    Abstract: This paper examines the value of an individual’s human capital and the associated return on human capital using U.S. data on male earnings and financial asset returns. We find that (1) the value of human capital is far below the value implied by discounting earnings at the risk-free rate and (2) the stock component of the value of human capital is smaller than the bond component at all ages. The stock component averages less than 35 percent of the value of human capital at each age.
    JEL: D91 E21 G12 J24
    Date: 2015–06
  7. By: Lasierra, Jose Manuel; Molina, Jose Alberto; Ortega, Raquel
    Abstract: Our purpose is to analyze job satisfaction and motivation of public employees in Spain to respond two questions. First, whether there is divergence between different public occupations and, second, what are the distinguishing features of that diversity? Using data from the Spanish Survey of Labor Conditions (ECVT, Encuesta de Condiciones y Vida en el Trabajo) 2006-2010, we estimate regressions for each of the 17 public occupations, with job satisfaction and motivation as the dependent variables, and a number of economic and socio-demographic determinants as exogenous variables. Our results, which can be considered contributions to the study of public management, reveal that the importance that public employees assign to the performance of their work, that is to say, to the idea of public service, is clearly a source of job satisfaction. These results do not fully support certain criticisms that require management philosophies to be closer to the private model, assuming that this can be more efficient for public employees.
    Keywords: Job satisfaction, Motivation, Public employees, Occupations, Spain
    JEL: J28 J30
    Date: 2015–06–10
  8. By: Ammann, Manuel; Horsch, Philipp; Oesch, David
    Abstract: This paper investigates the effect of superstar CEOs on their competitors. Exploiting shocks to CEO status due to prestigious media awards, we document a significant positive stock market performance of competitors of superstar CEOs subsequent to the award. The effect is more pronounced for competitors who have not received an award themselves, who are geographically close to an award winner and who are not entrenched. We observe an increase in risk-taking, operating performance and innovation activity of superstars’ competitors as potential channels for this positive performance. Our results suggest a positive overall welfare impact of corporate superstar systems due to the incentivizing effect on superstars’ competitors.
    Keywords: Competition; Firm performance; Risk-taking; Innovation; Awards; CEO
    JEL: G30 G31 G32 G34 J31 J33 L25
    Date: 2015–05
  9. By: Marconi, Gabriele (OECD); de Grip, Andries (ROA, Maastricht University)
    Abstract: We develop a general equilibrium overlapping generations model which is based on the view that education makes workers more productive by increasing their ability to learn from work experience, rather than providing skills that directly increase productivity. One important implication of the model is that the enrolment rate to education has a negative effect on the GDP in the medium term and a positive effect in the long term. This could be an explanation for the weak empirical relationship between education and economic growth that has been found in the empirical macroeconomic literature. Conversely, for a given enrolment rate, the quality of education, as measured by workers' ability to learn, has a positive effect on the GDP both in the medium and in the long term.
    Keywords: education, learning-by-doing, productivity, economic growth, overlapping generations model
    JEL: I25 J24 O11 O41
    Date: 2015–05
  10. By: Powell, Daniel; Rapp, Marc Steffen
    Abstract: Since August 2009, German legislation allows for voluntary Say on Pay Votes (SoPV) during Annual General Meetings (AGMs). We examine 1,169 AGMs of all German listed firms with more than 10,000 agenda items over the period 2010-2013 to identify (1) determinants and approval rates of voluntary SoPVs, (2) the effect of voluntary SoPVs on AGM participation, and (3) the effect of SoP on executive compensation. Our data reveals that in the first four years of the voluntary say on pay regime every second firm in our sample has opted for having a SoPV. The propensity for a SoPV increases with firm size, abnormal executive compensation and free float of shares. Indeed, smaller firms with concentrated ownership do not only have a lower propensity for a SoPV, but also show a higher propensity to opt for only limited disclosure of executive compensation. Approval rates of SoPVs are lower than the approval rate for the average AGM agenda item and this effect is stronger in (i) widely held firms as well as in (ii) firms with abnormal executive compensation. Additionally, SoPVs actually can increase AGM participation; however, this result is particularly evident for widely held firms. Finally, we find stronger pay for performance elements within total executive compensation, particularly when the effect of executive compensation is lagged over the years following the vote. Overall, our results are consistent with the view that firms use voluntary SoPV to gain legitimation for executive remuneration policies in firms with low ownership concentration. This is enforced, where (small) shareholders consider executive compensation a part of the agency problem of listed firms, and where (small) shareholders consider SoPVs as a possibility to actively influence corporate decisions, with these decisions leading to a higher degree of alignment between executive management boards and shareholders.
    Keywords: Corporate Governance,Executive Remuneration,Say on Pay,Annual General Meeting,Germany
    JEL: G30 G38 J30 J33
    Date: 2015
  11. By: Battisti, Michele
    Abstract: This paper presents a very simple model with present biased agents where optimal compensation schedules may be back-loaded, which is a characteristics of wage contracts we often observe in reality. There is large evidence that workers are often paid less than their marginal productivity early in their careers, and more than their marginal productivity later. In this model, back-loaded wage schedules emerge as a commitment device that allows to prevent sub-optimal consumption and labor supply patterns.
    Keywords: Present biased preferences; optimal wages; commitment device
    JEL: D03 J31
    Date: 2015–05–13
  12. By: Brosig-Koch, Jeannette; Kairies-Schwarz, Nadja; Kokot, Johanna
    Abstract: Most common physician payment schemes include some form of traditional capitation or fee-for-service payment. While health economics research often focuses on direct incentive effects of these payments, we demonstrate that the opportunity to sort into one's preferred payment scheme may also significantly affect medical treatment. Our study is based on an experiment testing individual sorting into fee-for-service and capitation payment under controlled laboratory conditions. A sequential design allows differentiating between sorting and incentive effects. We find a strong preference for fee-for-service payment, independent of subjects' prior experience with one of the two payment schemes. Our behavioral classification reveals that subjects who select into capitation deviate less from patient-optimal treatment than those who prefer fee-for-service payment. Moreover, comparing subjects' behavior before and after introducing the choice option, we find that subjects preferring fee-for-service become even less patient-oriented after this introduction. As a result, the opportunity to choose a payment scheme does not improve, but - if at all - worsens patient treatment in our experiment. Our findings stress the importance of acknowledging potential sorting and incentive effects in the analysis of physician payment schemes.
    Abstract: Die meisten der heutzutage verwendeten Arztvergütungen basieren auf der klassischen Einzelleistungsvergütung oder der Kopfpauschale. Während die gesundheitsökonomische Forschung häufig auf die direkten Anreizwirkungen dieser Vergütungssysteme fokussiert, wird hier gezeigt, dass auch die Möglichkeit, die eigene Vergütungsform frei zu wählen, die Behandlungsqualität signifikant beeinflussen kann. Die Studie basiert auf einem Experiment, in dem die Selektion in die Einzelleistungsvergütung und die Kopfpauschale unter kontrollierten Laborbedingungen getestet wird. Mit Hilfe eines sequentiellen Designs kann zwischen Anreiz- und Selektionseffekten differenziert werden. Zudem werden die beiden Vergütungsformen so gestaltet, dass sie identische Gewinnmöglichkeiten bieten. Die Ergebnisse offenbaren eine starke Präferenz für die Einzelleistungsvergütung - unabhängig von den vorherigen Erfahrungen der Teilnehmer mit den beiden Vergütungsformen. Die Analyse des Verhaltens vor der Einführung der Auswahlmöglichkeit zeigt, dass die Teilnehmer, die sich später in die Einzelleistungsvergütung selektieren, stärker von der patienten-optimalen Behandlung abweichen als die Teilnehmer, die sich später in die Kopfpauschale selektieren. Zudem nimmt bei den Teilnehmern, die die Einzelleistungsvergütung wählen, die Behandlungsqualität nach der Einführung der Auswahlmöglichkeit weiter ab. Im Ergebnis beobachten wir bei der Einführung einer Auswahlmöglichkeit zwischen Kopfpauschale und Einzelleistungsvergütung keine Verbesserung, sondern - wenn überhaupt - eine signifikante Verschlechterung der Behandlungsqualität. Die Befunde weisen darauf hin, dass bei der Beurteilung von Vergütungssystemen sowohl Anreizeffekte als auch potentielle Selektionseffekte zu berücksichtigen sind.
    Keywords: physician incentives,fee-for-service,capitation,payment choice,sorting effects,laboratory experiment
    JEL: C91 D84
    Date: 2014
  13. By: Brosig-Koch, Jeannette; Hennig-Schmidt, Heike; Kairies-Schwarz, Nadja; Wiesen, Daniel
    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.
    Abstract: In den letzten Jahren wurden klassische Entlohnungssysteme für Ärzte wie Einzelleistungsvergütung oder Kopfpauschale häufig durch gemischte Vergütungen ersetzt. Aus theoretischer Sicht sind diese gemischten Vergütungen den klassischen Vergütungen überlegen. Empirisch sind die kausalen Effekte der Einführung von gemischten Vergütungen auf das Arztverhalten jedoch unklar. Im Mittelpunkt dieses Beitrags steht die systematische Analyse der Verhaltenswirkungen von Kopfpauschale, Einzelleistungsvergütung und gemischten Vergütungssystemen. Mit Hilfe kontrollierter Laborexperimente werden die Arztvergütungen exogen variiert und die Auswirkungen auf die Behandlung von Patienten getestet. Im Rahmen des Experiments müssen die Teilnehmer in der Rolle des Arztes (N=213) über die Menge an medizinischen Leistungen entscheiden, die die Gesundheit realer Patienten außerhalb des Labors beeinflusst. Die Ergebnisse zeigen eine signifikante Überbehandlung bei der Einzelleistungsvergütung und eine signifikante Unterbehandlung bei der Kopfpauschale, allerdings in geringerem Ausmaß als dies theoretisch bei reiner Gewinnmaximierung prognostiziert wird. Die Einführung gemischter Vergütungssysteme reduziert die beobachteten Abweichungen von der patientenoptimalen Behandlung. Die Verhaltenswirkungen lassen sich mit Hilfe eines Verhaltensmodells abbilden, in dem den Teilnehmern ein gewisser Grad an Altruismus unterstellt wird. Der beobachtete Grad an Altruismus variiert stark zwischen den Teilnehmern. Die Befunde hängen nicht vom medizinischen Hintergrund der Teilnehmer ab und gelten damit sowohl für angehende Ärzte als auch für Studenten anderer Fachrichtungen.
    Keywords: fee-for-service,capitation,mixed payment systems,physician altruism,laboratory experiment
    JEL: C91 I11
    Date: 2015
  14. By: Bagaria, Nitika (London School of Economics); Petrongolo, Barbara (Queen Mary, University of London); Van Reenen, John (CEP, London School of Economics)
    Abstract: Disability rolls have escalated in developed nations over the last 40 years. The UK, however, stands out because the numbers on these benefits stopped rising when a welfare reform was introduced that integrated disability benefits with unemployment insurance (UI). This policy reform improved job information and sharpened bureaucratic incentives to find jobs for the disabled (relative to those on UI). We exploit the fact that the policy was rolled-out quasi-randomly across geographical areas. In the long-run the policy improved the outflows from disability benefits by 6% and had an (insignificant) 1% increase in unemployment outflows. This is consistent with a model where information helps both groups, but bureaucrats were given incentives to shift effort towards helping the disabled find jobs and away from helping the unemployed. Interestingly, in the short-run the policy had a negative impact for both groups, suggesting important disruption effects. We estimate that it takes about six years for the estimated benefits of the reform to exceed its costs, which is beyond the time horizon of most policy-makers.
    Keywords: incentives, public sector, unemployment benefits, performance standards
    JEL: H51 I13 J18
    Date: 2015–05
  15. By: Obloj , Tomasz; Zenger , Todd
    Abstract: The authors investigate the mechanisms that shape social comparison in organizations and generate social comparison costs. Drawing on the notions of inequity aversion and envy, they argue that heterogeneity in the strength and type of incentives provides an impetus for envy, and that the resulting social comparison costs are shaped not only by the magnitude of this impetus, but the distance of envy’s objects. In other words, the more proximate socially, structurally and geographically are those one envies the larger the costly behavioral response. To test our predictions, the authors use a quasi-experimental event during which outlets of a retail bank, previously operating under homogenous incentives, were assigned to four distinct tournament groups with differing ex ante probabilities of winning a prize — an event that provides envy’s impetus. The authors then explore how, for each outlet, the proximity of those assigned to more advantaged outlets — objects of envy — shape productivity responses. They find that organizational units with more socially, geographically, and structurally proximate peers assigned to ‘better’ tournament groups decreased their productivity, when compared to peers whose objects of envy were more socially, geographically, and structurally distant. They also show that these effects are stable over time. They discuss implications of these results for organizational design and boundaries.
    Keywords: Incentives; Social Comparison Costs; Envy; Organization Design
    Date: 2015–03–05

This nep-hrm issue is ©2015 by Tommaso Reggiani. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.