nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2015‒09‒05
twenty papers chosen by
Tommaso Reggiani
Universität zu Köln

  1. The Complementary Use of Experiments and Field Data to Evaluate Management Practices: The Case of Subjective Performance Evaluations By Kampkötter, Patrick; Sliwka, Dirk
  2. Team incentives and performance: Evidence from a retail chain By Friebel, Guido; Heinz, Matthias; Krüger, Miriam; Zubanov, Nick
  3. First-Place Loving and Last-Place Loathing: How Rank in the Distribution of Performance Affects Effort Provision By Gill, David; Kissová, Zdenka; Lee, Jaesun; Prowse, Victoria L.
  4. Ethnic Inequality: Theory and Evidence from Formal Education in Nigeria By Dev, Pritha; Mberu, Blessing; Pongou, Roland
  5. Family business: management effort and firm performance By Oriana Bandiera; Andrea Prat; Raffaella Sadun
  6. Aligning order picking methods, incentive systems, and regulatory focus to increase performance By de Vries, J.; de Koster, M.B.M.; Stam, D.A.
  7. Was Sarbanes-Oxley Costly? Evidence from Optimal Contracting on CEO Compensation By Gayle, George-Levi; Li, Chen; Miller, Robert A.
  8. Personalities and Public Sector Performance: Evidence from a Health Experiment in Pakistan By Callen, Michael; Gulzar, Saad; Hasanain, Ali; Khan, Yasir; Rezaee, Arman
  9. The Value and Risk of Human Capital By Benzoni, Luca; Chyruk, Olena
  10. Stock Market Investment: The Role of Human Capital By Athreya, Kartik B.; Ionescu, Felicia; Neelakantan, Urvi
  11. Business Practices in Small Firms in Developing Countries By David McKenzie; Christopher Woodruff
  12. Brazil : case study on working time organization and its effects in the health services sector By Matos de Oliveira, Ana Luíza
  13. Skill Gaps in the Workplace: Measurement, Determinants and Impacts By McGuinness, Seamus; Ortiz, Luis
  14. Where Do Social Preferences Come From? By Chaning Jang; John Lynham
  15. Upskilling: Do Employers Demand Greater Skill When Workers Are Plentiful? By Modestino, Alicia Sasser; Shoag, Daniel; Ballance, Joshua
  16. The impact of vocational schooling on human capital development in developing countries : evidence from China By Loyalka,Prashant Kumar; Huang,Xiaoting; Zhang,Linxiu; Wei,Jianguo; Yi,Hongmei; Song,Yingquan; Shi,Yaojiang; Chu,James
  17. A Theory of Intergenerational Mobility By Becker, Gary; Kominers, Scott Duke; Murphy, Kevin M.; Spenkuch, Jörg L.
  18. Job Satisfaction and Employee Turnover: A Firm-Level Perspective By Frederiksen, Anders
  19. What is the source of the intergenerational correlation in earnings? By Gayle, George-Levi; Golan, Limor; Soytas, Mehmet A.
  20. Wage compression within the firm By Marco Leonardi; Michele Pellizzari; Domenico Tabasso;

  1. By: Kampkötter, Patrick (University of Cologne); Sliwka, Dirk (University of Cologne)
    Abstract: Most firms rely on subjective evaluations by supervisors to assess their employees' performance. This article discusses the implementation of such appraisal processes, exploring the use of multiple research methods such as the analysis of personnel records, survey data, and lab and field experiments to study them in detail. We argue that the complementary use of these methods helps to build a better understanding of how subjective evaluations are conducted and appraisal systems should be designed.
    Keywords: subjective performance evaluation, performance appraisals, management practices, experiments, field data, LPP
    JEL: D22 J33 M12 M52
    Date: 2015–08
  2. By: Friebel, Guido; Heinz, Matthias; Krüger, Miriam; Zubanov, Nick
    Abstract: We test the effectiveness of team incentives by running a natural field experiment in a retail chain of 193 shops and 1,300 employees. As a response to intensified product market competition, the firm offered a bonus to shop teams for surpassing sales targets. A bonus to teams rather than individuals was a natural choice because the firm does not measure individual performance and relies on flexible task allocation among employees. On average, the team bonus increases sales and customer visits in the treated shops by around 3%, and wages by 2.3%. The bonus is highly profitable for the firm, generating for each bonus dollar an extra $3.80 of sales, and $2.10 of operational profit. The results show the importance of complementarities within teams and suggest that improved operational efficiency is the main mechanism behind the treatment effect. Our analysis of heterogeneous treatment effects offers a number of insights about the anatomy of teamwork. The firm decided to roll out the bonus to all of its shops, and the performance of treatment and control shops converged after the roll-out.
    Keywords: insider econometrics; management practices; natural field experiment; randomized controlled trial (RCT)
    JEL: J3 L2 M5
    Date: 2015–08
  3. By: Gill, David (University of Oxford); Kissová, Zdenka (PricewaterhouseCoopers LLP); Lee, Jaesun (Cornell University); Prowse, Victoria L. (Cornell University)
    Abstract: Rank-order relative-performance evaluation, in which pay, promotion and symbolic awards depend on the rank of workers in the distribution of performance, is ubiquitous. Whenever firms use rank-order relative-performance evaluation, workers receive feedback about their rank. Using a real-effort experiment, we aim to discover whether workers respond to the specific rank that they achieve. In particular, we leverage random variation in the allocation of rank among subjects who exerted the same effort to obtain a causal estimate of the rank response function that describes how effort provision responds to the content of rank-order feedback. We find that the rank response function is U-shaped. Subjects exhibit 'first-place loving' and 'last-place loathing', that is subjects increase their effort the most after being ranked first or last. We discuss implications of our findings for the optimal design of firms' performance feedback policies, workplace organizational structures and incentives schemes.
    Keywords: relative performance evaluation, relative performance feedback, rank order feedback, dynamic effort provision, real effort experiment, flat wage, fixed wage, taste for rank, status seeking, social esteem, self esteem, public feedback, private feedback
    JEL: C23 C91 J22 M12
    Date: 2015–08
  4. By: Dev, Pritha; Mberu, Blessing; Pongou, Roland
    Abstract: We study the causes of inequality in human capital accumulation across ethnic and religious groups. An overlapping generations model in which agents decide how much time to invest in human capital versus ethnic capital shows that the demand for human capital is affected positively by parental and group's older cohort human capital, and negatively by group size. Two ex-ante identical groups may diverge in human capital accumulation, with the divergence mostly occurring among their low-ability members. Furthermore, group and ethnic fragmentation increases the demand for human capital. We validate these predictions using household data from Nigeria where ethnicity and religion are the primary identity cleavages. We document persistent ethnic and religious inequality in educational attainment. Members of ethnic groups that historically converted to Christianity outperform those whose ancestors converted to Islam. Consistent with theory, there is little difference between the high-ability members of these groups, but low-ability members of historically Muslim groups choose Koranic education as an alternative to formal education, even when formal education is free. Moreover, more religiously fragmented ethnic groups fare better, and local ethnic fragmentation increases the demand for formal education. Our analysis sheds light on the political context that underlines the recent violent opposition to "western education" in the country.
    Keywords: Group Inequality, Human Capital, Ethnic Capital, Ethnic Politics, Koranic Education
    JEL: A13 C0 D4 D5 D9 I2 I21 I24 J0 N3 O1
    Date: 2015–08–20
  5. By: Oriana Bandiera; Andrea Prat; Raffaella Sadun
    Abstract: Might familyowned, familyrun firms be a serious obstacle to productivity growth in Europe? Oriana Bandiera, Andrea Prat and Raffaella Sadun have collected time use data on over 1,000 chief executive officers to explore differences in the hours worked by family and professional managers - and the impact on their firms' performance.
    Keywords: CEO, Time, Family firms, Competition, Productivity
    JEL: M12 L2 D24
    Date: 2015–07
  6. By: de Vries, J.; de Koster, M.B.M.; Stam, D.A.
    Abstract: A unique controlled field experiment investigates order picking performance (in terms of productivity and quality). We examined three manual picker-to-parts order picking methods (parallel, zone, and dynamic zone picking) under two different incentive systems (competition- based versus cooperation-based) for pickers with different regulatory foci (prevention-focus versus promotion-focus). The study was carried out in a warehouse erected especially for the purposes of order picking research. Our results show that when using a parallel picking method a competition- based incentive system increases productivity and quality compared to a cooperation-based incentive system, and that when using a zone picking method it is more productive to use a cooperation- based incentive system. This pattern of results was especially pronounced for pickers with a dominant promotion focus. Dominantly prevention focused pickers, however, were more productive with a cooperation-based incentive system, irrespective of the picking method. Additionally, a cooperation-based incentive system delivered a low quality performance in zone picking, but a high quality performance in dynamic zone picking. The analyses demonstrate that by aligning order picking methods, incentive systems and regulatory focus, warehouses can improve productivity and quality, and reduce wage costs by up to 20%.
    Keywords: behavioral operations, warehousing, order picking, incentives
    Date: 2015–07–09
  7. By: Gayle, George-Levi (Federal Reserve Bank of St. Louis); Li, Chen (Zicklin School of Business, Baruch College, CUNY); Miller, Robert A. (Tepper School of Business, Carnegie Mellon University)
    Abstract: This paper develops measures of the costs and benefits of governance regulations within a dynamic principal agent model of hidden information and moral hazard following the passage of the Sarbanes-Oxley Act (SOX). We estimate the effects of changes in CEO compensation for S&P 1500 firms and find SOX increased total compensation in the primary sector, increasing both its agency and administrative components. The net effect was mainly insignificant in the consumer and service sectors, with agency costs rising (falling) but administrative costs falling (rising) in larger (smaller) firms.
    JEL: C10 C12 C13 J30 J33 M50 M52 M55
    Date: 2015–08–20
  8. By: Callen, Michael (Harvard University); Gulzar, Saad (NYU); Hasanain, Ali (University College, Oxford and Lahore University of Management Sciences); Khan, Yasir (Lahore University of Management Sciences); Rezaee, Arman (University of CA, San Diego)
    Abstract: This paper provides evidence that the personality traits of policy actors matter for policy outcomes in the context of two large-scale experiments in Punjab, Pakistan. Three results support the relevance of personalities for policy outcomes. First, doctors with higher Big Five and Perry Public Sector Motivation scores attend work more and falsify inspection reports less. Second, health inspectors who score higher on these personality measures exhibit a larger treatment response to increased monitoring. Last, senior health officials with higher Big Five scores are more likely to respond to a report of an under-performing facility by compelling better subsequent staff attendance.
    Date: 2015–05
  9. By: Benzoni, Luca (Federal Reserve Bank of Chicago); Chyruk, Olena (Federal Reserve Bank of Chicago)
    Abstract: Human capital embodies the knowledge, skills, health and values that contribute to making people productive. These qualities, however, are hard to measure, and quantitative studies of human capital are typically based on the valuation of the lifetime income that a person generates in the labor market. This article surveys the theoretical and empirical literature that models a worker’s life-cycle earnings and identifies appropriate discount rates to translate those cash flows into a certainty equivalent of wealth. This paper begins with an overview of a stylized model of human capital valuation with exogenous labor income. The authors then discuss extensions to this framework that study the underlying economic sources of labor income shocks, the choices, such as work, leisure, retirement and investment in education, that people make over their life and their implications for human capital valuation and risk.
    Keywords: human capital; labor income; employment
    JEL: G10 G12 J22 J24 J26 J31
    Date: 2015–07–20
  10. By: Athreya, Kartik B. (Federal Reserve Bank of Richmond); Ionescu, Felicia (Board of Governors of the Federal Reserve System (U.S.)); Neelakantan, Urvi (Federal Reserve Bank of Richmond)
    Abstract: Portfolio choice models counterfactually predict (or advise) almost universal equity market participation and a high share for equity in wealth early in life. Empirically consistent predictions have proved elusive without participation costs, informational frictions, or nonstandard preferences. We demonstrate that once human capital investment is allowed, standard theory predicts portfolio choices much closer to those empirically observed. Two intuitive mechanisms are at work: For participation, human capital returns exceed ?nancial asset returns for most young households and, as households age, this is reversed. For shares, risks to human capital limit the household's desire to hold wealth in risky ?nancial equity.
    Keywords: Human capital investment; life-cycle; financial portfolios
    JEL: E21 G11 J24
    Date: 2015–06–14
  11. By: David McKenzie; Christopher Woodruff
    Abstract: Management has a large effect on the productivity of large firms. But does management matter in micro and small firms, where the majority of the labor force in developing countries works? We develop 26 questions that measure business practices in marketing, stock-keeping, record-keeping, and financial planning. These questions have been administered in surveys in Bangladesh, Chile, Ghana, Kenya, Mexico, Nigeria and Sri Lanka. We show that variation in business practices explains as much of the variation in outcomes – sales, profits and labor productivity and TFP – in microenterprises as in larger enterprises. Panel data from three countries indicate that better business practices predict higher survival rates and faster sales growth. The effect of business practices is robust to including numerous measures of the owner’s human capital. We find that owners with higher human capital, children of entrepreneurs, and firms with employees employ better business practices. Competition has less robust effects.
    JEL: L26 M20 O12
    Date: 2015–08
  12. By: Matos de Oliveira, Ana Luíza
    Abstract: This country case study aimed at identifying existing working time arrangements and practices in the health services sector in Brazil and studying their influence on workers' wellbeing, including their work-life-balance, and organizational performance. The explorative study is based on a literature review as well as qualitative interviews with health workers, managers, policy makers, professional associations and trade unionists in the health sector in five regions of the country. It describes the Brasilian health system; the legislation and regulation regarding working time; organizational needs of health facilities, patterns of shift scheduling and mechanisms for consultation with staff. The paper also identifies key working-time related factors affecting staff morale and performance and describes staff and managerial perceptions an preferences of working time arrangements and concludes with a set of recommendations.
    Keywords: arrangement of working time, work organization, medical personnel, health service, hours of work, work life balance, case study, Brazil, aménagement du temps de travail, organisation du travail, personnel médical, service de santé, durée du travail, conciliation travail-vie personnelle, étude de cas, Brésil, ordenamiento del tiempo de trabajo, organización del trabajo, personal médico, servicio de salud, horas de trabajo, conciliación vida familiar y laboral, estudio de casos, Brasil
    Date: 2015
  13. By: McGuinness, Seamus (Economic and Social Research Institute, Dublin); Ortiz, Luis (Universitat Pompeu Fabra)
    Abstract: Optimal training decisions require employers to have accurate information about their workers' training needs. However, little is known with regard to the key factors determining the accurate transmission of worker training requirements. Using one of the few linked employer-employee surveys in the world, the 2006 Irish National Employment Survey, this paper identifies the key factors determining the correct identification of skill gaps within firms. The impact of skill gaps on average training expenditures and labour costs is also measured. The research finds that both HRM and collective bargaining arrangements are important factors in facilitating the accurate identification of skill gaps within firms. The analysis confirms that skill gaps are a key determinant of training expenditures and tend to raise average labour costs. Finally, the evidence suggests that employee perceptions of skill gaps may be prone to higher levels of subjective bias relative to those based on the employers' views.
    Keywords: skill gaps, subjective bias, labour costs, training costs
    JEL: J20 J24 J50
    Date: 2015–08
  14. By: Chaning Jang (Princeton University, Department of Psychology); John Lynham (University of Hawaii at Manoa, Department of Economics)
    Abstract: Where do preferences for fairness come from? We use a unique field setting to test for a spillover of sharing norms from the workplace to a laboratory experiment. Fishermen working in teams receive random income shocks (catching fish) that they must regularly divide among themselves. We demonstrate a clear correlation between sharing norms in the field and sharing norms in the lab. Furthermore, the spillover effect is stronger for fishermen who have been exposed to a sharing norm for longer, suggesting that our findings are not driven by selection effects. Our results are consistent with the hypothesis that work environments shape social preferences.
    JEL: Q2 C9 C7 B4 D1
    Date: 2015–08
  15. By: Modestino, Alicia Sasser (Northeastern University); Shoag, Daniel (Harvard University); Ballance, Joshua (Federal Reserve Bank of Boston)
    Abstract: In the wake of the Great Recession, policymakers and academics have expressed concerns about rising employer skill requirements. Using a large database of online job postings for middle-skill occupations, we demonstrate that employers opportunistically raise education and experience requirements, within occupations, in response to increases in the supply of relevant job seekers. This relationship is robust to numerous tests for potentially confounding factors, is present even within firm-job title pairs, and is consistent with the predictions of a standard employer search model. We further identify this effect by exploiting the natural experiment arising from troop withdrawals in Iraq and Afghanistan as an exogenous shock to local, occupation specific labor supply. Our results imply that increases in the number of people looking for work can account for roughly 30 percent of the total increase in employer skill requirements observed between 2007 and 2010.
    JEL: J21 J23 J63
    Date: 2015–03
  16. By: Loyalka,Prashant Kumar; Huang,Xiaoting; Zhang,Linxiu; Wei,Jianguo; Yi,Hongmei; Song,Yingquan; Shi,Yaojiang; Chu,James
    Abstract: A number of developing countries are currently promoting vocational education and training (VET) as a way to build human capital and strengthen economic growth. The primary aim of this study is to understand whether VET at the high school level contributes to human capital development in one of those countries?China. To fulfill this aim, a longitudinal data on more than 10,000 students in vocational high school (in the most popular major, computing) and academic high school from two provinces of China are used. First, estimates from instrumental variables and matching analyses show that attending vocational high school (relative to academic high school) substantially reduces math skills and does not improve computing skills. Second, heterogeneous effect estimates also show that attending vocational high school increases dropout, especially among disadvantaged (low-income or low-ability) students. Third, vertically scaled (equated) baseline and follow-up test scores are used to measure gains in math and computing skills among the students. The results show that students who attend vocational high school experience absolute reductions in math skills. Taken together, the findings suggest that the rapid expansion of vocational schooling as a substitute for academic schooling can have detrimental consequences for building human capital in developing countries such as China.
    Keywords: Education For All,Secondary Education,Tertiary Education,Effective Schools and Teachers,Primary Education
    Date: 2015–08–18
  17. By: Becker, Gary; Kominers, Scott Duke; Murphy, Kevin M.; Spenkuch, Jörg L.
    Abstract: We develop a model of intergenerational resource transmission that emphasizes the link between cross-sectional inequality and intergenerational mobility. By drawing on first principles of human capital theory, we derive several novel results. In particular, we show that, even in a world with perfect capital markets and without differences in innate ability, wealthy parents invest, on average, more in their offspring than poorer ones. As a result, persistence of economic status is higher at the top of the income distribution than in the middle. Successive generations of the same family may even cease to regress towards the mean. Moreover, we demonstrate that government interventions intended to ameliorate inequality may in fact lower intergenerational mobility—even when they do not directly favor the rich. Lastly, we consider how mobility is affected by changes in the marketplace.
    Keywords: intergenerational mobility; human capital; inequality;
    JEL: D1 D10 D31 J0
    Date: 2015–08
  18. By: Frederiksen, Anders (Aarhus University)
    Abstract: In this paper, I study an employment situation where the employer and the employees cooperate about the implementation of a job satisfaction survey. Cooperation is valuable because it improves the firm's ability to predict employee quits, but it is only an equilibrium outcome because the employer-employee relation is repeated and long-term. Using a unique combination of firm-level data and information from job satisfaction surveys, the empirical analysis reveals that the cooperation reduces the firm's employee turnover costs significantly by improving its ability to predict quits. This cost reduction may easily exceed the cost of conducting the survey. The analysis also reveals that the firm is willing to sacrifice profits in a given year to be able to sustain the cooperative relationship with the employees.
    Keywords: quits, job satisfaction, cooperation, retention
    JEL: M5
    Date: 2015–08
  19. By: Gayle, George-Levi (Federal Reserve Bank of St. Louis); Golan, Limor (Federal Reserve Bank of St. Louis); Soytas, Mehmet A. (Graduate School of Business, Ozyegin University)
    Abstract: This paper uses a dynastic model of household behavior to estimate and decomposed the correlations in earnings across generations. The estimate model can explain 75% to 80% of the observed correlation in lifetime earnings between fathers and sons, mothers and daughters, and families across generations. The main results are that the family and division of labor within the household are the main source of the correlation across generation and not just assorting mating. The interaction of human capital accumulation in labor market, the nonlinear return to part-time versus full-time work, and the return parental time investment in children are the main driving force behind the intergenerational correlation in earnings and assortative mating just magnify these forces.
    Keywords: Intergenerational Models; Estimation; Discrete Choice; Human Capital; PSID
    JEL: C13 J13 J22 J62
    Date: 2015–08–24
  20. By: Marco Leonardi; Michele Pellizzari; Domenico Tabasso;
    Abstract: We study the distributional effect of a wage indexation mechanism - the Scala Mobile (SM) - that heavily compressed the distribution of Italian wages during the 1970s and 1980s. The SM imposed large real wage increases at the bottom of the distribution and was essentially irrelevant for high-wage workers. We document that this mechanism triggered a strong redistribution within the firm. Skilled workers received lower wage adjustments when employed at firms with many unskilled workers and they tended to move towards more skill-intensive firms. We rationalize these findings with a simplified model of intra-firm bargaining with on-the-job search.
    Keywords: Labor market institutions, wage indexation, inequality, intra-firm bargaining
    Date: 2015–08

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