nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2015‒06‒20
twenty-one papers chosen by
Tommaso Reggiani
Universität zu Köln

  1. Reciprocity in Organisations By Englmaier, Florian; Kolaska, Thomas; Leider, Stephen
  2. The Role of Communication of Performance Schemes: Evidence from a Field Experiment By Englmaier, Florian; Roider, Andreas; Sunde, Uwe
  3. Contracting with Private Rewards By Rene Kirkegaard
  4. Team Incentives and Leadership By Michalis Drouvelis; Daniele Nosenzo; Martin Sefton
  5. Combining "Real Effort" with Induced Effort Costs: The Ball-Catching Task By Simon Gaechter; Lingbo Huang; Martin Sefton
  6. Do green jobs differ from non-green jobs in terms of skills and human capital? By Davide Consoli; Giovanni Marin; Alberto Marzucchi; Francesco Vona
  7. Monetary Incentives for Corporate Inventors: Intrinsic motivation, project selection and inventive performance By ONISHI Koichiro; OWAN Hideo; NAGAOKA Sadao
  8. Sorting Within and Across French Production Hierarchies By Grigorios Spanos
  9. Pay package reshuffling and managerial incentives: A principal-agent analysis By Alessandro Fedele; Luca Panaccione
  10. Complementarities of HRM Practices By Englmaier, Florian; Schüßler, Katharina
  11. How Does Collective Reputation Affect Hiring? Selection and Sorting in an Online Labour Market By Guo Xu
  12. ROLE OF BUSINESS ETHICS IN MANAGEMENT OF HUMAN RESOURCES By Branko Mihailovic, Drago Cvijanovic, Zoran Simonovic
  13. Teams, Organization and Education Outcomes: Evidence from a field experiment in Bangladesh By Youjin Hahn; Asadul Islam; Eleonora Patacchini; Yves Zenou
  14. Does to pay to win the Stanley Cup? By Derek Lanoue
  15. The Effect of Energy Consumption and Human Capital on Economic Growth: An Exploration of Oil Exporting and Developed Countries By Fatema Alaali; Jennifer Roberts; Karl Taylor
  16. The human capital transition and the role of policy By Ralph Hippe; Roger Fouquet
  17. Firms and Skills: The Evolution of Worker Sorting By Håkanson, Christina; Lindqvist, Erik; Vlachos, Jonas
  18. Productivity and performance in the public sector. By Mathieu Lefebvre; Sergio Perelman; Pierre Pestieau
  19. The General Effects of Educational Expansion By Nicola Bianchi
  20. Control of corruption, Action of public power, Human capital and Economic development: Application two sectors of education and health in the MENA region By Mtiraoui, Abderraouf
  21. Women as ‘gold dust’: gender diversity in top boards and the performance of Italian banks By Silvia Del Prete; Maria Lucia Stefani

  1. By: Englmaier, Florian; Kolaska, Thomas; Leider, Stephen
    Abstract: Recent laboratory evidence suggests that personality traits, in particular social preferences, may affect contractual outcomes under moral hazard. Using the British Workplace Employment Relations Survey 2004 we find that behaviour of employers and employees is consistent with the presence of gift-exchange motives: firms that screen applicants for personality are less likely to pay low wages and more likely to provide (non-pecuniary) benefits. Firms likewise benefit from employee screening as they can implement more team-working and are generally more successful. Other human resource management practices only poorly predict these patterns. Moreover, there is no association between dismissals and personality tests, indicating that personality tests do not merely improve the fit between applicant and employer. Hence, we conclude that motivation based on gift-exchange motives is a plausible explanation for our results.
    Keywords: Reciprocity; Organisational Structure; Employee Compensation
    JEL: D22 M52
    Date: 2015–03–17
  2. By: Englmaier, Florian; Roider, Andreas; Sunde, Uwe
    Abstract: In corporate practice, incentive schemes are often complicated even for simple tasks. Hence, the way they are communicated might matter. In a controlled field experiment, we study a minimally invasive change in the communication of a well-established incentive scheme - a reminder regarding the piece rate at the beginning of the shift. The experiment was conducted in a large firm where experienced managers work in a team production setting and here incentives for both quantity and quality of output are provided. While the treatment conveyed no additional material information and left the incentive system unchanged, it had significant positive effects on quantity and on managers' compensation. These effects are economically sizable and robust to alternative empirical specifications. We consider various potential mechanisms, where our preferred explanation - improved salience of incentives - is consistent with all of the findings
    Keywords: incentives; attention; salience; communication; field experiment
    JEL: M52 J30 D03 D80
    Date: 2014–04
  3. By: Rene Kirkegaard (Department of Economics and Finance, University of Guelph)
    Abstract: I extend the canonical moral hazard model to allow the agent to face endogenous and non-contractible uncertainty. The agent works for the principal and simultaneously pursues private rewards. I establish conditions under which the first-order approach remains valid. The model adds to the literature on intrinsic versus extrinsic motivation. Specifically, to induce higher effort at work the contract may offer higher rewards but flatter incentives. The contract change makes the agent reevaluate his “work-life balanceâ€. Larger employment rewards lessens the incentive to pursue private rewards. The greater reliance on labor income then necessitates weaker explicit incentives to induce high effort.
    Keywords: First-Order Approach, Intrinsic Motivation, Moral Hazard, Multi-tasking, Principal-Agent Models, Private Rewards
    JEL: D82 D86
    Date: 2015
  4. By: Michalis Drouvelis (Department of Economics, University of Birmingham.); Daniele Nosenzo (Department of Economics, University of Nottingham.); Martin Sefton (Department of Economics, University of Nottingham.)
    Abstract: We study, experimentally, how two alternative incentive mechanisms affect team performance, and how a team chooses between alternative mechanisms. We study a group incentive mechanism, where team output is shared equally among team members, and a hierarchical mechanism team output is allocated by a team leader. Our experiment examines these mechanisms in both homogeneous teams, where workers have identical productivities and in heterogeneous teams, where workers vary in their productivity. Our results are robust to whether teams are homogeneous or heterogeneous. We find that output is higher when a leader has the power to allocate output, but this mechanism also generates large differences between earnings of leaders and other team members. When team members can choose how much of team output is to be shared equally and how much is to be allocated by a leader, they tend to restrict the leader’s power to distributing less than half of the pie.
    Keywords: Team Production, Leadership, Reward Power, Delegation, Experiment
    Date: 2015–05
  5. By: Simon Gaechter (Department of Economics, University of Nottingham.); Lingbo Huang (Department of Economics, University of Nottingham); Martin Sefton (Department of Economics, University of Nottingham)
    Abstract: We introduce the “ball-catching taskâ€, a novel computerized real effort task, which combines “real†efforts with induced material cost of effort. The central feature of the ball-catching task is that it allows researchers to manipulate the cost of effort function as well as the production function, which permits quantitative predictions on effort provision. In an experiment with piece-rate incentives we find that the comparative static and the point predictions on effort provision are remarkably accurate. We also present experimental findings from three classic experiments, namely, team production, gift exchange and tournament, using the task. All of the results are closely in line with the stylized facts from experiments using purely induced values. We conclude that the ball-catching task combines the advantages of real effort with induced values, which is useful for theory-testing purposes as well as for applications.
    Keywords: Experimental design, real effort task, induced values, incentives, piece-rate theory, team incentives, gift exchange, tournaments, online real effort experiments
    Date: 2015–08
  6. By: Davide Consoli (INGENIO CSIC-UPV, Valencia (Spain)); Giovanni Marin (IRCrES-CNR, Milano (Italy); OFCE-SciencesPo, Sophia Antipolis (France)); Alberto Marzucchi (Catholic University of Milan (Italy), SPRU, University of Sussex, Brighton (UK)); Francesco Vona (OFCE-SciencesPo, Sophia Antipolis (France), SKEMA Business School, Sophia Antipolis (France))
    Abstract: This paper elaborates an empirical analysis of labour force characteristics associated to environmental sustainability. Using data on the United States we compare green and non-green occupations to detect differences in terms of skill content and of human capital. Our empirical profiling reveals that green jobs use high-level abstract skills significantly more than non-green jobs. Moreover, green occupations exhibit higher levels of education, work experience and on-the-job training. While preliminary, this exploratory exercise calls attention to an underdeveloped theme, namely the labour market implications associated with the transition towards green growth.
    Keywords: Skills, Green Jobs, Task Model, Human Capital
    JEL: J21 J24 O31 O33 Q20 Q40
    Date: 2015–05
  7. By: ONISHI Koichiro; OWAN Hideo; NAGAOKA Sadao
    Abstract: Using novel panel data on Japanese inventors, we investigate how monetary incentives affect corporate inventors' behavior and performance, as well as how they interact with the strength of intrinsic motivation. In order to identify the effects, we exploit inventors' responses to a policy change in Japan in the early 2000s that forced firms to strengthen monetary incentives for inventors. Our major findings are as follows: (1) while introducing or increasing revenue-based payments is associated with a small improvement in patent quality, such schemes significantly decrease the use of science in research and development (R&D) projects; (2) the above positive effect of revenue-based payment on patent quality is smaller and the negative effect on scientific intensity is greater in research areas where risk heterogeneity among potential projects is greater; (3) the strength of intrinsic motivation is significantly associated with the inventor's patent productivity; and (4) strong intrinsic motivation weakens the marginal effect of monetary incentive on inventive productivity, and reinforces the negative effect of monetary incentive on scientific intensity in research areas where risk heterogeneity among potential projects is sufficiently large. The results are consistent with our model predictions and imply that strengthening monetary incentives changes project selection toward less risky and less exploratory ones.
    Date: 2015–06
  8. By: Grigorios Spanos (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)
    Abstract: The objective of this paper is to examine the assignment of workers to layers and firms. In particular, I use an administrative dataset of French workers to study the organization of firms. First, I test whether higher ability workers are employed in the higher layers of firms. Second, I test whether there is positive assortative matching between workers in the different layers of firms. Third, I test whether higher ability workers allow their managers to increase their span of control and employ larger teams. To do this, I first classify employees as residing in different organizational layers such as production and administrative workers, supervisors, senior managers, and owners and CEOs, using occupational codes. From a panel wage regression I then obtain estimates of workers’ ability as in Abowd et al. (1999). I then study how workers sort into layers and across layers with other workers. I emphasize three results. First, higher ability workers are employed in the higher layers of firms. Second, I find evidence of positive assortative matching between workers in the different layers of firms. Third, I find different mechanisms are behind the sorting pattern observed in the data. I find evidence that higher ability workers limit their managers’ span of control, and I also find weak evidence that higher ability workers allow their managers to increase their span of control and employ larger teams.
    Keywords: positive assortative matching, firm organization, matched employer-employee data, high-dimensional fixed effects
    Date: 2015–06–15
  9. By: Alessandro Fedele (Free University of Bolzano‐Bozen, Faculty of Economics and Management); Luca Panaccione (DEDI and CEIS, Università Tor Vergata)
    Abstract: By deferring a significant portion of managers' remuneration, managers bear the risk of their choices for a longer period of time and avoid excessive risk taking. The effectiveness of this mechanism is jeopardized if managers reshuffle their pay packages; this is possible when trades in the components of pay packages are not verifiable. In this paper, we investigate the relevance of trade verifiability in pay packages design. We analyze a principal-agent model with agent's compensation made of different commodities which can be exchanged on competitive markets at given prices. We consider both the case when trades in commodities are verifiable, and when they are not. We prove that an optimal contract when trades are verifiable remains optimal when trades are not verifiable if agent's preferences for commodities are independent of the action performed. We provide examples to illustrate what happens when preferences' independence fails.
    Keywords: Pay package reshuffling, Principal-agent model, Independent preferences
    JEL: D82 D86 J33
  10. By: Englmaier, Florian; Schüßler, Katharina
    Abstract: We provide an overview over different literature streams that aim at explaining the origin of persistent productivity differences across organization by variation in the use of management practices. We focus on human resource management (HRM) practices, document gaps in the literature, and show how insights from behavioral economics can inform the analysis. To this end, we develop a simple agency model illustrating how social preferences influence the design and impact of incentive schemes, investigate how auxiliary HRM practices can strengthen this interaction, and provide an overview over empirical investigations of this questions. Finally, we identify avenues for further research in this field.
    Keywords: Complementarities; HRM practices; Method mix; Social preferences; Persistent Productivity Differences.
    JEL: D22 M50 M52
    Date: 2015–03–03
  11. 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
  12. By: Branko Mihailovic, Drago Cvijanovic, Zoran Simonovic (Institute of Agricultural Economics, Belgrade)
    Abstract: The development of modern industry and the system of factory work, together with a large migration of people across oceans and continents, especially during the nineteenth and early twentieth century, has led to major changes in the way people work and do business. The economy shifted from agriculture and family cooperatives to the urban, the industrial organization. The impact of these changes on individuals, professionals, families, communities and the environment, as well as the rise of a new class of wealthy business leaders, but also new areas of poverty, have led to increased reporting of ethical debate. At the same time, if someone has a clear interest in a given company, then to its employees, whose lives and professional careers closely associated with it. Business ethics pays attention to employees (including employees of the management) in several ways. First, most of the ethical problems and crises that occur include operation and participation of employees. Ethical analysis of choice, communication, and behavior of employees occupying a significant part of business ethics. How can managers and owners treat the workers is another ethical issue of interest. Job security, compensation, safety, harassment, prejudice, and even the quality of work experience, are all aspects that are ethically important.
    Keywords: business ethics, human resources management, communications, social responsibility
    JEL: M21 M54
    Date: 2015–03
  13. By: Youjin Hahn; Asadul Islam; Eleonora Patacchini; Yves Zenou
    Abstract: We study the relationship between network centrality and educational outcomes using a field experiment in primary schools in Bangladesh. After obtaining information on friendship networks, we randomly allocate students into groups and give them individual and group assignments. We find that the groups that perform the best are those whose members have high Katz-Bonacich and key-player centralities. Leaders are mostly responsible for this effect, while bad apples have little influence. Group members’ network centrality is also important in shaping individual performance. We show that network centrality captures non-cognitive skills, especially patience and competitiveness.
    Keywords: Network centrality, team work, leaders, soft skills
    JEL: A14 C93 D01 I20
    Date: 2015–05
  14. By: Derek Lanoue (Department of Economics, University of Windsor)
    Abstract: Yes, it does indeed pay to win the Stanley Cup (SC). Professional sports offer a unique opportunity to examine the relationship between a player’s salary and their performance. Salary statistics have become widely available and enable individual performance scrutiny in relation to remuneration level. There is an extensive literature explaining which factors in‡uence the players’ salary in the National Hockey League (NHL), using data sets from different seasons and including various performance indicators. Although much is known about salary and performance in professional hockey, there is a lack of understanding and empirical evidence of the pecuniary value of winning the Stanley Cup (SC) - the trophy awarded annually to the NHL playoff champion and the ultimate prize in professional hockey. Our empirical analysis suggests that winning the Stanley cup the season prior to signing a new contract earns players a 19% wage premium on their next contract.
    Keywords: National Hockey League, NHL, Salary, Stanley Cup, Hockey Analytics
    JEL: J24 J31 J33 J44 L83
    Date: 2015–06
  15. By: Fatema Alaali (Department of Economics, University of Sheffield); Jennifer Roberts (Department of Economics, University of Sheffield); Karl Taylor (Department of Economics, University of Sheffield)
    Abstract: Energy has long been argued as an essential factor for the development of the economy and therefore it should be brought in line with the other production factors of neoclassical economics, capital and labour. Using panel data for 130 countries from 1981 to 2009, this paper explores the impact of multiple forms of energy consumption and human capital on per capita GDP growth. Generalized method of moments is applied to estimate an augmented neoclassical growth model that includes education and health capital as well as energy consumption. The key outcomes from this study show that education and health capital have a signifficant effect on economic growth. Energy consumption is also found to support higher growth. The results on the differential effects of energy and human capital on the economic growth of the developed and oil exporting countries indicate that energy consumption has a significant positive effect in both types of countries. Education capital affects the developed countries positively while health capital affects the oil exporting countries' economic growth negatively. These results are useful for policy makers, especially in less developed countries encouraging them to implement, for example, compulsory secondary education and child immunizations in order to reach higher standards of living. Moreover, energy must be used more efficiently to ensure sustainable growth.
    Keywords: Growth, Education, Health, Human Capital, Mortality Rates, Energy Consumption.
    JEL: I15 I25 Q43
    Date: 2015–06
  16. By: Ralph Hippe; Roger Fouquet
    Abstract: A potentially important source of green growth in the future is the expansion of the weightless or dematerialised knowledge economy. Along with information and communication technology (ICT) and infrastructure, and the innovation system, human capital is a key pillar of this knowledge economy with its scope for increasing returns. With this in mind, the purpose of this paper is to investigate how industrialised economies managed to achieve the transition from low to high levels of human capital, and to identify lessons for green growth. The first phase of the human capital transition was the result of the interaction of supply and demand, triggered by technological change and boosted by the demands for (immaterial) services. The second phase of the human capital transition (i.e. mass education) resulted from enforced legislation and major public investment. The state’s aim to influence children’s beliefs appears to have been a key driver in public investment. Nevertheless, the roles governments played differed according to the developmental status and inherent socioeconomic and political characteristics of their countries. These features of the human capital transition are directly relevant to future transitions associated with green growth, and highlight the importance of understanding governments’ incentives and roles in transitions.
    Date: 2015–03
  17. By: Håkanson, Christina (Sveriges Riksbank); Lindqvist, Erik (Stockholm School of Economics); Vlachos, Jonas (Department of Economics,)
    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 patterns and skill gradients can account for a about half of the increase in between-firm wage dispersion.
    Keywords: Skill sorting; Skilled-biased technological change; Outsourcing; Globalization; Cognitive skills; Non-cognitive skills; Personality; Employer-employee matched data
    JEL: J24 J62 L21 O33
    Date: 2015–06–04
  18. By: Mathieu Lefebvre; Sergio Perelman; Pierre Pestieau
    Abstract: In times of budgetary difficulties it is not surprising to see public sector performance questioned. What is surprising is that what is meant by performance, and how it is measured, does not seem to matter to either the critics or the advocates of the public sector. The purpose of this paper is to suggest a definition, and a way to measure the performance of the public sector or rather of its main components. Our approach is explicitly rooted in the principles of welfare and production economics. We will proceed in two stages. First of all we present what we call the "performance approach" to the public sector. This concept rests on the principal-agent relation that links a principal, i.e., the public authority, and an agent, i.e., the person in charge of the public sector unit, and on the definition of performance as the extent to which the agent fulfils the objectives assigned to him by the principal. The performance is then measured by using the notion of productive efficiency and the "best practice" frontier technique. We then move to the issue of measuring the performance of some canonical components of the public sector (railways transportation, waste collection, secondary education and health care). We survey some typical studies of efficiency and emphasize the important idea of disentangling conceptual and data problems. This raises the important question that given the available data, does it make sense to assess and measure the performance of such public sector activities? In the second stage we try to assess the performance of the overall public sector. We argue that for such a level of aggregation one should restrict the performance analysis to the outcomes and not relate it to the resources involved. As an illustration we then turn to an evaluation of the performance of the European welfare states using the DEA approach.
    Keywords: performance measure, best practice frontier, social protection.
    JEL: H50 C14 D24
    Date: 2015
  19. By: Nicola Bianchi (Stanford University)
    Abstract: In an effort to raise skills or promote equality, states sometimes engage in sweeping reforms that rapidly increase access to education for a significant share of their population. Such reforms are hard to evaluate because they may alter more than the outcomes of marginal students induced to enroll. They may change returns to skill, school quality, peer effects, and the educational choices of apparently inframarginal students (those who would have enrolled in the absence of the reform). I identify such general equilibrium effects by examining a dramatic 1961 Italian reform that increased university enrollment in science, technology, engineering, and math (STEM) fields by more than 200 percent in a few years. The peculiar features of the reform allow me to identify students who were unaffected, directly affected, and indirectly affected. They also allow me to identify key channels through which the effects ran. Using data I collected from tax returns and hand-written transcripts on more than 27,000 students, I show that the direct effects of the reform were as intended: many more students enrolled and many more obtained degrees. However, I also find that those induced to enroll earned no more than students in earlier cohorts who were denied access to university. I reconcile these surprising results by showing that the education expansion reduced returns to skill and lowered university learning through congestion and peer effects. I also demonstrate that apparently inframarginal students were significantly affected: the most able of them abandoned STEM majors rather than accept lower returns and lower human capital.
    Keywords: educational expansion, educational policy, higher education, human capital, quality of education, class heterogeneity.
    JEL: I21 I24 I28 J24 N34
    Date: 2015–06
  20. By: Mtiraoui, Abderraouf
    Abstract: The objective of this article is to study the direct and indirect effects of corruption control via the action of public power on economic development (economic growth, education, health, etc.). This work also seeks to show spending on areas of education and health to improve the skills and human capital levels of education. Finally, we try to test the complementarity between the role of the action of public power and control of corruption (anti-corruption) in a context of economic development while using the models of simultaneous equations for our area of MENA study, during a definite period (1984-2012).
    Keywords: Economic growth, control of corruption, action of public power, Human capital and Models of simultaneous equations.
    JEL: I0
    Date: 2015–06–12
  21. By: Silvia Del Prete (Bank of Italy); Maria Lucia Stefani (Bank of Italy)
    Abstract: European comparisons for the 2000s show that Italy was among the EU countries where women were least represented in bank boardrooms. Using a unique dataset on Italian banks over the period 1995-2010, this paper investigates the effects of gender diversity in boards on bank riskiness and economic performance. Taking account of omitted variables and reverse causality problems, as a source of endogeneity, our main econometric findings suggest that gender diversity may have a positive impact on the quality of credit and, to a lesser extent, on profitability. Both results may be driven by women’s higher risk aversion and their attitude to monitoring activities. Our study therefore suggests that women are ‘gold dust’ for Italian banks and that increasing their presence may be beneficial to economic performance.
    Keywords: banking, corporate governance, gender diversity, board of directors
    JEL: G21 G34 J16
    Date: 2015–06

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