nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2015‒08‒19
sixteen papers chosen by
Tommaso Reggiani
Universität zu Köln

  1. Ambiguous incentives and the persistence of effort: Experimental evidence By Robin M. Hogarth; Marie Claire Villeval
  2. Gender differences in tournament and flat-wage schemes: An experimental study By David Masclet; Emmanuel Peterle; Sophie Larribeau
  3. The Dark Side of Competition for Status By Gary Charness; David Masclet; Marie Claire Villeval
  4. Choosing To Be "Good": How Managers Determine Their Impact on Financial and Social Performance By Bryan Hong; Dylan Minor
  5. Contests vs. piece rates in product market competition By Pull, Kerstin; Stadler, Manfred
  6. Sorting Within and Across French Production Hierarchies By Grigorios Spanos
  7. Performance Standards and Employee Effort: Evidence from Teacher Absences By Gershenson, Seth
  8. Quality and Accountability in Healthcare Delivery: Audit-Study Evidence from Primary Care in India By Jishnu Das; Alaka Holla; Aakash Mohpal; Karthik Muralidharan
  9. Intergenerational Transmission of Human Capital: Is It a One-Way Street? By Lundborg, Petter; Majlesi, Kaveh
  10. Ownership and Pay in Britain By Pendleton, Andrew; Bryson, Alex; Gospel, Howard
  11. Human capital productivity and uncertainty By Mbaye DIENE; Bity Diene; T AZOMAHOU
  12. Human Capital Formation, International Labor Mobility and the Optimal Design of Educational Grants By Bernard Franck; Robert F. Owen
  13. Human Capital Spillovers and the Geography of Intergenerational Mobility By Brant Abbott; Giovanni Gallipoli
  14. The role of accounting conservatism in executive compensation contracts By Takuya Iwasaki; Shota Otomasa; Atsushi Shiiba; Akinobu Shuto
  15. A women’s boom in the boardroom: effects on performance? By Mareva Sabatier
  16. Incentives to patients versus incentives to health care providers: The users' perspective By Izabela Jelovac; Philippe Polomé

  1. By: Robin M. Hogarth (Universitat Pompeu Fabra - Universitat Pompeu Fabra); Marie Claire Villeval (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - CNRS)
    Abstract: When the assignment of incentives is uncertain, we study how the regularity and frequency of rewards and risk attitudes influence participation and effort. We contrast three incentive schemes in a real-effort experiment in which individuals decide when to quit : a continuous incentive scheme and two intermittent ones, fixed and random. In all treatments, we introduce a regime shift by withdrawing monetary rewards after the same unknown number of periods. In such an ambiguous environment, we show that less able and more risk averse players are less persistent in effort. Intermittent incentives lead to a greater persistence of effort, while continuous incentives entail exit as soon as payment stops. Randomness increases both earlier and later exiting. This selection effect in terms of ability and risk attitudes combined with the impact of intermittent rewards on persistence lead to an increase in mean performance after the regime shift when incentives are intermittent.
    Date: 2014
  2. By: David Masclet (CIRANO - Centre interuniversitaire de recherche en analyse des organisations - UQAM - Université du Québec à Montréal, CREM - Centre de Recherche en Economie et Management - CNRS - Université de Caen Basse-Normandie - UR1 - Université de Rennes 1); Emmanuel Peterle (CREM - Centre de Recherche en Economie et Management - CNRS - Université de Caen Basse-Normandie - UR1 - Université de Rennes 1); Sophie Larribeau (CREM - Centre de Recherche en Economie et Management - CNRS - Université de Caen Basse-Normandie - UR1 - Université de Rennes 1)
    Abstract: We present a new experiment that explores gender differences in both performance and compensation choices. While most of the previous studies have focused on tournament vs. piece-rate schemes, the originality of our study consists in examining the gender gap in the context of a flat wage scheme. Our data indicate that females exert a significantly higher effort than men in fixed payment schemes. We find however no gender difference in performance under the tournament scheme, due to a combination of two effects. On the one hand, men more significantly increase their effort when switching from a flat wage to a tournament scheme. On the other hand, when switching from the flat wage to a tournament scheme, women have less margin to increase performance since their effort was already relatively high with a flat wage. We also find that females are more likely than males to choose a flat-wage scheme than a tournament. This gap however narrows dramatically when feedback on previous experience is provided.
    Date: 2015
  3. By: Gary Charness (Department of Economics, University of California - University of California, Santa Barbara); David Masclet (Economie industrielle et économie comportementale - CREM - Centre de Recherche en Economie et Management - CNRS - Université de Caen Basse-Normandie - UR1 - Université de Rennes 1); Marie Claire Villeval (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS - UCBL - Université Claude Bernard Lyon 1 - UL2 - Université Lumière - Lyon 2 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - ENS Lyon - École normale supérieure - Lyon)
    Abstract: Unethical behavior within organizations is not rare. We investigate experimentally the role of status-seeking behavior in sabotage and cheating activities aiming at improving one’s performance ranking in a flat-wage environment. We find that average effort is higher when individuals are informed about their relative performance. However, ranking feedback also favors disreputable behavior. Some individuals do not hesitate to incur a cost to improve their rank by sabotaging others’ work or by increasing artificially their own performance. Introducing sabotage opportunities has a strong detrimental effect on performance. Therefore, ranking incentives should be used with care. Inducing group identity discourages sabotage among peers but increases in-group rivalry.
    Date: 2014–12–03
  4. By: Bryan Hong (Ivey Business School, Western University); Dylan Minor (Harvard Business School, Strategy Unit)
    Abstract: We investigate the relationship between a manager's influence on firm financial and social performance. To examine the mechanism governing the relationship between a manager's investment decisions along both dimensions of performance, we use a formal agency theory model to develop testable implications. In our empirical results, we find that a manager's influence on firm CSR activities is negatively related to their influence on financial performance. Also, as suggested by the implications of the model, we find that managers who operate in industries with more volatile financial performance and receive a lower share of compensation from incentive-based pay are more likely to have a positive influence on firm social performance.
    Date: 2015–06
  5. By: Pull, Kerstin; Stadler, Manfred
    Abstract: We study product market competition between firm owners (principals) where workers (agents) decide on their efforts and, hence, on output levels. Two worker compensation schemes are compared: a piece rate compensation as a benchmark when workers' output performance is verifiable, and a contest-based compensation scheme with variable, revenue-based prizes when it is only verifiable who the best performing worker is, i.e., only 'contest performance' is verifiable.Without rivalry between firms, the two compensation schemes lead to the same results. In case of product market competition, however, contest-based compensation schemes lead to more employment, more production, and lower firm profits. The reduction in profits represents the cost of being only able to verify workers' contest performance instead of output performance.
    Keywords: worker compensation,piece rates,team contests,revenue sharing,strategic competition
    JEL: C72 L22 M52
    Date: 2015
  6. By: Grigorios Spanos (AMSE - Aix-Marseille School of Economics - EHESS - École des hautes études en sciences sociales - Centre national de la recherche scientifique (CNRS) - Ecole Centrale Marseille (ECM) - AMU - Aix-Marseille Université)
    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.
    Date: 2015–06
  7. By: Gershenson, Seth (American University)
    Abstract: The 2001 No Child Left Behind Act (NCLB) increased accountability pressure in U.S. public schools by threatening to impose sanctions on Title-1 schools that failed to make Adequate Yearly Progress (AYP) in consecutive years. Difference-in-difference estimates of the effect of failing AYP in the first year of NCLB on teacher effort in the subsequent year suggest that on average, teacher absences in North Carolina fell by about 10% and the probability of being absent 15 or more times fell by about 20%. Reductions in teacher absences were driven by within-teacher increases in effort.
    Keywords: performance standards, employee effort, teacher absences, accountability, NCLB
    JEL: J45 J48 J22 I2
    Date: 2015–07
  8. By: Jishnu Das; Alaka Holla; Aakash Mohpal; Karthik Muralidharan
    Abstract: We present the first direct evidence on the relative quality of public and private healthcare in a low-income setting, using a unique set of audit studies. We sent standardized (fake) patients to rural primary care providers in the Indian state of Madhya Pradesh, and recorded the quality of care provided and prices charged in each interaction. We report three main findings. First, most private providers lacked formal medical training, but they spent more time with patients and completed more essential checklist items than public providers, and were equally likely to provide a correct treatment. Second, we compare the performance of qualified public doctors across their public and private practices, and find that the same doctors exerted higher effort and were more likely to provide a correct treatment in their private practices. Third, in the private sector, we find that prices charged are positively correlated with provider effort and correct treatment, but also with unnecessary treatments. In the public sector, we find no correlation between provider salaries and any measure of quality. We develop a simple theoretical framework to interpret our results and show that in settings with low levels of effort in the public sector, the benefits of higher diagnostic effort in the private sector may outweigh the costs of market incentives to over treat. These differences in provider effort may partly explain the dominant market share of fee-charging private providers even in the presence of a system of free public healthcare.
    JEL: D40 H10 H42 I11 O15
    Date: 2015–07
  9. By: Lundborg, Petter (Department of Economics, Lund University); Majlesi, Kaveh (Department of Economics, Lund University)
    Abstract: Studies on the intergenerational transmission of human capital usually assume a one-way spillover from parents to children. But what if children also affect their parents’ human capital? Using exogenous variation in education, arising from a Swedish compulsory schooling reform in the 1950s and 1960s, we address this question by studying the causal effect of children’s schooling on their parents’ longevity. We first replicate previous findings of a positive and significant cross-sectional relationship between children’s education and their parents’ longevity. Our causal estimates tell a different story; children’s schooling has no significant effect on parents’ survival. These results hold when we examine separate causes of death and when we restrict the sample to low-income and low-educated parents.
    Keywords: Intergenerational transmission; Human capital; Longevity; Compulsory schooling; Education
    JEL: I10 I21 J14
    Date: 2015–08–10
  10. By: Pendleton, Andrew (University of Durham); Bryson, Alex (National Institute of Economic and Social Research (NIESR)); Gospel, Howard (King's College London)
    Abstract: Drawing on principal-agent perspectives on corporate governance, this paper examines whether employees' hourly pay is linked to ownership dispersion. Using linked workplace-worker data from the British Workplace Employment Relations Survey (WERS) 2011, we find average hourly pay is higher in dispersed ownership workplaces. The raw gap of 30 log points falls to 8 log points when we control for differences in worker and workplace characteristics. The premium is constant across most of the wage distribution, but falls a little at the 90th percentile to become statistically non-significant. This contrasts with earlier papers which indicate that higher level employees are the primary beneficiaries of higher pay from dispersed ownership.
    Keywords: ownership structure, corporate governance, principal agent, pay
    JEL: G3 G32 G31
    Date: 2015–07
  11. By: Mbaye DIENE (University Cheikh-Anta-Diop and CRES - University Cheikh-Anta-Diop and CRES - University Cheikh-Anta-Diop and CRES); Bity Diene (CERDI - Centre d'études et de recherches sur le developpement international - CNRS - Université d'Auvergne - Clermont-Ferrand I); T AZOMAHOU (UNU-MERIT - UNU-MERIT - United Nations University - Maastricht University)
    Abstract: Several policies or interventions have been implemented in developing countries with the ultimate goal of improving educational outcomes and human capital. While lots of empirical studies have pointed to mixed results of these interventions, the role of uncertainty arising from the state of the nature about educational environment, household characteristics, along- side the efficiency of these interventions still lack economic mechanism. This paper aims at developing a theoretical framework that links policy interventions to educational outcomes. We characterize optimal policies and determine the conditions for enhancing social welfare. We also study the optimal growth of the economy under uncertainty and population heterogeneity when human capital is produced and used in the education sector. We show that the growth rate of the unskilled population has a direct impact on the growth of human and physical capitals.
    Date: 2015–04–23
  12. By: Bernard Franck (CREM - Centre de Recherche en Economie et Management - CNRS - Université de Caen Basse-Normandie - UR1 - Université de Rennes 1); Robert F. Owen (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - UN - Université de Nantes)
    Abstract: A two-country, two-period model of international migration with heterogeneous agents highlights microeconomic foundations for examining the interrelation between brain drain, brain gain and whether human capital formation is undertaken at home or abroad. Ex ante choices regarding where to study depend on abilities, relative qualities of university systems, sunk educational investments, government grants, and endogenously determined, individual foreign employment probabilities. Self-selection critically defines an inherently wide-range of conceivably positive or negative net welfare effects. The optimal design of alternative educational grant schemes, aimed at enhancing the source country’s welfare, also depends on the heterogeneity of abilities and associated informational assumptions.
    Date: 2015–05–30
  13. By: Brant Abbott (Yale University); Giovanni Gallipoli (UBC)
    Abstract: We develop and estimate an equilibrium model of geographic variation in the intergenerational earnings elasticity (IGE). The theory extends the Becker-Tomes model, introducing a production sector in which human capital inputs are strategic complements. We show that the equilibrium return to human capital investments is lower in places where strategic complementarity is more intense, and that this is associated with less intergenerational persistence (lower IGEs). Furthermore, optimal education policies are more progressive where these complementarities are stronger, leading to a negative correlation between progressive public policy and IGEs. Using microdata we construct various location-specific measures of skill complementarity and document that the patterns of geographic variation in IGEs are consistent with our hypothesis. Quantitatively, geographic differences in skill complementarity account for up to 1/5 of cross-country variation in intergenerational earnings persistence. Governments in countries where prominent industries exhibit greater skill complementarities tend to spend larger fractions of GDP on public education, suggesting that underlying technology differences may indirectly explain an even larger proportion of cross-country IGE variation.
    Date: 2015
  14. By: Takuya Iwasaki (Kansai University); Shota Otomasa (Kansai University); Atsushi Shiiba (Osaka University); Akinobu Shuto (The University of Tokyo)
    Abstract: To test the implication of WattsÂf (2003) argument that accounting conservatism increases the efficiency of executive compensation contracts, we investigate the relationship between accounting conservatism and earnings-based executive compensation contracts in Japanese firms. We focus on Japanese executive compensation practices because the demand for accounting conservatism is likely to be larger for Japanese than U.S. firms because of the predominance of earnings-based executive compensation contracts and lack of explicit compensation contracts in Japan. Consistent with our arguments, we find a positive relationship between accounting conservatism and the compensation earnings coefficient. Furthermore, this positive relationship is greater for firms with poor ex-ante information environment. These results suggest that the demand for accounting conservatism is higher for firms that use more earnings-based executive compensation contracts and have more serious ex post settling up problems.
    Date: 2015–07
  15. By: Mareva Sabatier (IREGE - Institut de Recherche en Gestion et en Economie - Université de Savoie)
    Abstract: This article analyzes whether improving gender diversity in boardrooms improves firms' economic performance. In the context of French CAC40-listed companies between 2008 and 2012, this research uses instrumental variable panel regressions, including production frontier estimates, to arrive at two key results. First, gender diversity in boards depends on firms' attributes, including their previous gender promotion strategies. Second, promoting women in boardrooms has a significant and positive effect on economic performance, after accounting for the endogeneity of diversity. Gender diversity even reduces corporate inefficiencies and enables firms to come closer to their optimal performance.
    Date: 2015
  16. By: Izabela Jelovac (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS - UCBL - Université Claude Bernard Lyon 1 - UL2 - Université Lumière - Lyon 2 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - ENS Lyon - École normale supérieure - Lyon); Philippe Polomé (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS - UCBL - Université Claude Bernard Lyon 1 - UL2 - Université Lumière - Lyon 2 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - ENS Lyon - École normale supérieure - Lyon)
    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.
    Date: 2015

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