nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2015‒06‒27
sixteen papers chosen by
Tommaso Reggiani
Universität zu Köln

  1. A Big Fish in a Small Pond: Ability Rank and Human Capital Investment By Elsner, Benjamin; Isphording, Ingo E.
  2. The business cycle human capital accumulation nexus and its effect on hours worked volatility By Diana Alessandrini; Stephen Kosempel; Thanasis Stengos
  3. Not Working at Work: Loafing, Unemployment and Labor Productivity By Burda, Michael C.; Genadek, Katie R.; Hamermesh, Daniel S.
  4. The effects of firing costs on the wage contracts under adverse selection. By Anne Bucher; Sébastien Ménard
  5. Does Worker Wellbeing Affect Workplace Performance? By Bryson, Alex; Forth, John; Stokes, Lucy
  6. Financial Incentives are Counterproductive in Non-Profit Sectors: Evidence from a Health Experiment By Elise Huillery; Juliette Seban
  7. Deviating from the benchmarks: Human capital inputs and the survival of new startups By Vera Rocha; Mirjam van Praag; Anabela Carneiro
  8. Do Wage Expectations Influence the Decision to Enroll in Nursing College? By Schweri, Jürg; Hartog, Joop
  9. Human Capital Persistence and Development By Rocha, Rudi; Ferraz, Claudio; Soares, Rodrigo R.
  10. Does the gender mix among employers influence who gets hired? A labor market experiment By Alexia Gaudeul; Ayu Okvitawanli; Marian Panganiban
  11. Choosing a Human Capital Measure: Educational Attainment Gaps and Rankings By Barbara M. Fraumeni
  12. Braaaaaaaains! The Undead Humbug Production Function: Now With Human Capital By Mike Isaacson
  13. The Leader/Talent Matrix: An Empirical Perspective on Organizational Culture By Tim Kane
  14. Peers' Composition Effects in the Short and in the Long Run: College Major, College Performance and Income By Anelli, Massimo; Peri, Giovanni
  15. Reforming an institutional culture of corruption: A model of motivated agents and collective reputation By Valasek, Justin
  16. Human Capital Quality and Aggregate Income Differences: Development Accounting for U.S. States By Eric A. Hanushek; Jens Ruhose; Ludger Woessmann

  1. By: Elsner, Benjamin (IZA); Isphording, Ingo E. (IZA)
    Abstract: We study the impact of a student's ordinal rank in a high school cohort on educational attainment several years later. To identify a causal effect, we compare multiple cohorts within the same school, exploiting idiosyncratic variation in cohort composition. We find that a student's ordinal rank significantly affects educational outcomes later in life. If two students with the same ability have a different rank in their respective cohort, the higher- ranked student is significantly more likely to finish high school, attend college, and complete a 4-year college degree. These results suggest that low-ranked students under-invest in their human capital even if they have a high ability compared to most students of the same age. Exploring potential channels, we find that students with a higher rank have higher expectations about their future career, a higher perceived intelligence, and receive more support from their teachers.
    Keywords: human capital, ordinal rank, peer effects, educational attainment
    JEL: I21 I23 J24
    Date: 2015–06
  2. By: Diana Alessandrini (Auburn University); Stephen Kosempel (Department of Economics and Finance, University of Guelph); Thanasis Stengos (Department of Economics and Finance, University of Guelph)
    Abstract: This paper studies hours worked volatility and the cyclicality of human capital investments by embedding a Ben-Porath life-cycle model of human capital accumulation into an RBC setting. Agents differ across two dimensions: age and productivity in learning. Our results show that individuals invest more in human capital during economic downturns. However, human capital accumulation is more counter-cyclical for young and low-productivity individuals because they face a lower opportunity cost of education and a higher marginal product of human capital. These results are confirmed empirically using US data from the Current Population Survey and the American Time Use Survey. In addition, the paper contributes to the RBC literature by showing that the modelÕs business cycle properties, in particular hours worked volatility, are sensitive to assumptions of heterogeneity. Introducing heterogeneity in productivity increases the volatility of aggregate hours worked and changes the life-cycle profile for hours volatility to better match the data.
    Keywords: hours worked volatility; human capital accumulation; business cycles; heterogeneous agents
    JEL: J22 J24 E32
    Date: 2014
  3. By: Burda, Michael C. (Humboldt University Berlin); Genadek, Katie R. (University of Minnesota); Hamermesh, Daniel S. (Royal Holloway; University of Texas at Austin)
    Abstract: Using the American Time Use Survey (ATUS) 2003-12, we estimate time spent by workers in non-work while on the job. Non-work time is substantial and varies positively with the local unemployment rate. While the average time spent by workers in non-work conditional on any positive non-work rises with the unemployment rate, the fraction of workers who report time in non-work varies pro-cyclically, declining in recessions. These results are consistent with a model in which heterogeneous workers are paid efficiency wages to refrain from loafing on the job. That model correctly predicts relationships of the incidence and conditional amounts of non-work with wage rates and measures of unemployment benefits in state data linked to the ATUS, and it is consistent with observed occupational differences in non-work.
    Keywords: time use, non-work, loafing, shirking, efficiency wage, labor productivity
    JEL: J22 E24
    Date: 2015–06
  4. By: Anne Bucher; Sébastien Ménard
    Abstract: We develop a two-period principal-agent model to investigate the effects of firing costs on self-selection mechanisms and on the optimal wage contracts under adverse selection. There are two types of risk-averse workers who differ by their ability. The worker’s ability is private information but revealed once engaged in production. The adverse selection problem may be solve by workers’ selection from a menu of separating contracts that specifies a sequence of wages with dismissal being the only form of punishment to a worker who overstated his ability. We find that as firing costs increase, the wage-tenure profile of high-ability workers gets steeper while the information rent left to low-ability workers vanishes. For higher levels of firing costs, an incentive menu of contracts provides the most able workers with a lower starting wage than the less able workers. As the expected profit from separating contracts decreases with dismissal costs, there exists a threshold above which the employer prefers to offer a pooling wage that might drive good workers out of the labor market.
    Keywords: Adverse Selection, Principal Agent, Labor Contracts, Wage, Firing Costs.
    JEL: D82 J31 J41 J08
    Date: 2015
  5. By: Bryson, Alex (National Institute of Economic and Social Research (NIESR)); Forth, John (National Institute of Economic and Social Research (NIESR)); Stokes, Lucy (National Institute of Economic and Social Research (NIESR))
    Abstract: This paper uses linked employer-employee data to investigate the relationship between employees' subjective well-being and workplace performance in Britain. The analyses show a clear, positive and statistically-significant relationship between the average level of job satisfaction at the workplace and workplace performance. This finding is present in both cross-sectional and panel analyses and is robust to various estimation methods and model specifications. In contrast, we find no association between levels of job-related affect and workplace performance.
    Keywords: subjective wellbeing, job satisfaction, job-related affect, workplace performance
    JEL: J28
    Date: 2015–06
  6. By: Elise Huillery (Département d'économie); Juliette Seban (Centre d'économie de la Sorbonne)
    Abstract: Financial incentives for service providers are becoming a common strategy to improve service delivery. However, this strategy will only work if demand for the service responds as expected. Using a eld experiment in the Democratic Republic of Congo, we show that introducing a performance-based financing mechanism in the health sector has counterproductive effects because demand is non-standard: despite reduced prices and eased access, demand for health decreased, child health deteriorated, workers' revenue dropped. Ironically, expected perverse effects of incentives on worker behavior were not realized: incentives led to more effort from health workers on rewarded activities without deterring effort on non-rewarded activities, nor inducing significant score manipulation or free-riding. We also find a decline in worker motivation following the removal of the incentives, below what it would have been in the absence of exposure to the incentives. Management tools used in for-pro t sectors are thus inappropriate in non-pro t sectors such as health where user and worker rationalities are specific.
    JEL: H51 I18 O12
    Date: 2015–03
  7. By: Vera Rocha (Copenhagen Business School – INO); Mirjam van Praag (Copenhagen Business School – INO); Anabela Carneiro (Universidade do Porto – cef.up)
    Abstract: This paper studies three related questions: To what extent otherwise similar startups employ different quantities and qualities of human capital at the moment of entry? How persistent are initial human capital choices over time? And how does deviating from human capital benchmarks influence firm survival? The analysis is based on a matched employer-employee dataset and covers about 17,500 startups in manufacturing and services. We adopt a new procedure to estimate individual benchmarks for the quantity and quality of initial human resources, acknowledging correlations between hiring decisions, founders' human capital, and the ownership structure of startups (solo entrepreneurs versus entrepreneurial teams). We then study the survival implications of exogenous deviations from these benchmarks, based on spline models for survival data. Our results indicate that (especially negative) deviations from the benchmark can be substantial, are persistent over time, and hinder the survival of firms. The implications may, however, vary according to the sector and the ownership structure at entry. Given the stickiness of initial choices, wrong human capital decisions at entry turn out to be a close to irreversible matter with significant survival penalties.
    Keywords: Keywords: human resources, human capital, startup conditions, new ventures, firm survival, entrepreneurs, intra-industry dynamics
    Date: 2015–06
  8. By: Schweri, Jürg (Swiss Federal Institute for Vocational Education and Training); Hartog, Joop (University of Amsterdam)
    Abstract: As Switzerland experiences a severe shortage of nurses, this paper investigates the impact of students' ex ante wage expectations on their choice to pursue a nursing college education. This analysis contributes to a small yet rapidly developing body of literature that uses subjective expectation data to predict educational choices. We surveyed a full cohort of healthcare trainees in their third year of training. The main result is that those trainees (in upper-secondary education) who expected a greater return from nursing college (tertiary education) were more likely to enroll in nursing college later on. This suggests that policies that increase returns from studying nursing can attract students to nursing. In addition, the results confirm that subjective wage expectation data are useful in modeling individual choice.
    Keywords: college choice, fractional regression, healthcare, human capital, nursing, subjective expectations, training, wage
    JEL: I11 I21 J24 J31 D84
    Date: 2015–06
  9. By: Rocha, Rudi (Federal University of Rio de Janeiro (IE-UFRJ)); Ferraz, Claudio (Pontifical Catholic University of Rio de Janeiro (PUC-Rio)); Soares, Rodrigo R. (Sao Paulo School of Economics)
    Abstract: This paper examines the role of human capital persistence in explaining long-term development. We exploit variation induced by a state-sponsored settlement policy that attracted a pool of immigrants with higher levels of schooling to particular regions of Brazil in the late 19th and early 20th century. We show that municipalities that received settlements experienced increases in schooling that persisted over time. One century after the policy, localities that received state-sponsored settlements had higher levels of schooling and income per capita. We provide evidence that long-run effects were driven by persistently higher supply and use of educational inputs and shifts in the structure of occupations towards skill-intensive sectors.
    Keywords: human capital, education, immigration, development
    JEL: O15 O18 N36
    Date: 2015–06
  10. By: Alexia Gaudeul (Friedrich-Schiller-Universität, Jena); Ayu Okvitawanli (Friedrich-Schiller-Universität, Jena); Marian Panganiban (Friedrich-Schiller-Universität, Jena, and Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: We consider in this paper whether the gender mix at the level of decision-makers in firms can influence gender representation at the employee level. We run a laboratory experiment whereby we present a pair of independent employers with applications from two potential employees. We consider whether the gender of the other employer will influence an employer's hiring decision. We find that the gender mix among employers plays a role in the individual hiring decisions of female members. Female employers when paired with a male employer are more likely to choose a female applicant over an equally competent male applicant. Results of an Implicit Association Test (IAT) and answers to a post-experimental questionnaire show that explicit beliefs about relative gender performance are significantly associated with the observed hiring bias, while implicit attitudes do not appear to play a role.
    Keywords: discrimination, hiring, IAT, implicit attitudes, gender quotas, labor markets, employment
    JEL: J71 J78 C91
    Date: 2015–06–18
  11. By: Barbara M. Fraumeni
    Abstract: According to the World Bank and the United Nations, human capital is the largest component of human wealth for most countries in the world. There is no question that human capital is critical to individual and society well-being and both present and future growth. This presentation draws upon an analysis of human capital measures for 18 countries, including the three most populous countries in the world: China, India, and the United States. This paper will focus on two human capital issues, which are considerations in choosing a human capital measure: the size of the educational attainment gap between those younger and older, and differences in rankings using alternative human capital measures. In a number of countries, younger individuals (age 25-24) have a significantly higher educational attainment than older individuals (aged 55-64). For these countries, expectations are that economic growth and well-being will improve over the longer term. Lifetime income measures which explicitly include the expected future work history and income of all individuals in a country are preferred over other measures if these gaps matter. The answer to the question: “What is the human capital ranking of countries?” depends upon the reference measure. Six types of measures are considered: PISA test scores, PIAAC, Barro-Lee educational attainment, Inclusive Wealth human capital, Jorgenson-Fraumeni lifetime income, and World Bank intangible capital. What explains the significant differences in the rankings? Is it important unmeasured attributes or country specific institutions and labor markets? Is it a failure of standard economic assumptions, such as individuals being paid what they are worth, to predict labor market outcomes? It is critical to answer these questions before choosing a human capital measure to predict economic growth and well-being in general, and notably the impact of younger cohorts being more highly educated than older cohorts.
    JEL: E24 I25
    Date: 2015–06
  12. By: Mike Isaacson (Department of Economics, New School for Social Research)
    Abstract: This paper demonstrates that the human-capital augmented Cobb-Douglas function is identically equal to the rules of aggregate accounting with any factor indices and an arbi- trary `human capital' variable thrown in. It is demonstrated empirically that the term for `total factor productivity' does not show total factor productivity at all, but rather a factor share weighted geometric mean of the prot rate and the quotient of the wage rate and human capital. It is demonstrated empirically with randomly generated data that both the calculation of this term as well as tests of its explanatory power in development economics are the result of using an arbitrary variable correlative with wages. It is also a story about zombies.
    Keywords: Capital, development accounting, human capital, methodology
    JEL: A13 B4 C43 E13 E24
    Date: 2015–06
  13. By: Tim Kane
    Abstract: The United States military has a peculiar management dilemma: there is a strong consensus about the need – highlighted by numerous recent Secretaries of Defense – to reform personnel policies but uncertainty about how to proceed. In order to make private sector experiences and academic insights more relevant, this study presents a new, forty-element assessment of organizational leadership culture and talent management practices. Results from a survey of more than 566 respondents identify strengths and weaknesses between military and nonmilitary organizations. Although US armed forces are evaluated higher on a few elements of leadership culture, they have deep weaknesses in talent management. Regression analysis reveals which elements are significant factors for organizational performance.
    Date: 2015–06
  14. By: Anelli, Massimo (University of California, Davis); Peri, Giovanni (University of California, Davis)
    Abstract: In this paper we use a newly constructed dataset following 30,000 Italian individuals from high school to labor market and we analyze whether the gender composition of peers in high school affected their choice of college major, their academic performance and their labor market income. We leverage the fact that the composition of high school classmates (peers), within school-cohort and teacher-group, was not chosen by the students and it was as good as random. We find that male students graduating from classes with at least 80% of male peers were more likely to choose "prevalently male" (PM) college majors (Economics, Business and Engineering). However, this higher propensity to enroll in PM majors faded away during college (through transfers and attrition) so that men from classes with at least 80% of male peers in high school did not have higher probability of graduating in PM majors. They had instead worse college performance and did not exhibit any difference in income or labor market outcomes after college. We do not find significant effects on women.
    Keywords: peer effects, high school, gender, choice of college major, academic performance, wages
    JEL: I21 J16 J24 J31 Z13
    Date: 2015–06
  15. By: Valasek, Justin
    Abstract: Recent empirical studies suggest that poor public sector performance in developing nations is due in part to the difficultly of selecting workers whose motivation is aligned with the mission of the institution - in direct contrast to evidence from developed nations, public sector workers tend to be less prosocial. Moreover, contrary to the public sector efficiency-wage argument, empirical evidence from developing countries suggests that motivation is weakly increasing in wages. This paper provides an account for this discrepancy between developed and developing nations by analyzing a model where motivated workers value the collective reputation of their institution, e.g. due to a prosocial signaling motive or identity concerns. The initial insight of the analysis is that there exists both a highreputation, low-wage equilibrium and a low-reputation, high-wage equilibrium. Importantly, the comparative statics of motivation and wage differ between the equilibria: starting from low-reputation, higher wages crowd in motivation, while starting from high-reputation, higher wages crowd out motivation. The paper also details the implications of this model for successful reform: taking reputation as the state variable, we show that a non-monotonic wage path is required to achieve a transition to the high-reputation equilibrium - an initial wage increase to crowd in motivated workers, followed by a wage decrease to crowd out nonmotivated workers.
    Keywords: Corruption,Motivated Workers,Institutional Reform
    JEL: D23 D73 L32
    Date: 2015
  16. By: Eric A. Hanushek; Jens Ruhose; Ludger Woessmann
    Abstract: Although many U.S. state policies presume that human capital is important for state economic development, there is little research linking better education to state incomes. In a complement to international studies of income differences, we investigate the extent to which quality-adjusted measures of human capital can explain within-country income differences. We develop detailed measures of state human capital based on school attainment from census micro data and on cognitive skills from state- and country-of-origin achievement tests. Partitioning current state workforces into state locals, interstate migrants, and immigrants, we adjust achievement scores for selective migration. We use the new human capital measures in development accounting analyses calibrated with standard production parameters. We find that differences in human capital account for 20-35 percent of the current variation in per-capita GDP among states, with roughly even contributions by school attainment and cognitive skills. Similar results emerge from growth accounting analyses.
    JEL: I25 J24 O47
    Date: 2015–06

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