nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2015‒09‒18
twelve papers chosen by
Patrick Kampkötter
Universität zu Köln

  1. Work-related ability as source of information advantages of training employers By Mohrenweiser, Jens; Wydra-Sommaggio, Gaby; Zwick, Thomas
  2. Incentive Contracts for Teams: Experimental Evidence By Landeo, Claudia; Spier, Kathryn
  3. Affirmative Action and Human Capital Investment: Theory and Evidence from a Randomized Field Experiment By Christopher Cotton; Brent Hickman; Joseph Price
  4. Work-Life Balance Practices, Performance-Related Pay, and Gender Equality in the Workplace: Evidence from Japan By KATO Takao; KODAMA Naomi
  5. The Productive Workplace for Knowledge Workers: A focus on workplace design and environment across various age groups. By A. Chadburn; J. Smith
  6. Relatedness through experience: On the importance of collected worker experiences for plant performance By Lisa Östbring, Rikard Eriksson, Urban Lindgren; Rikard Eriksson; Urban Lindgren
  7. Essays in regulation and organizational economics By Alessandro De Chiara
  8. High school human capital portfolio and college outcomes By Guy Tchuente
  9. Multidimensional Skill Mismatch By Guvenen, Fatih; Kuruscu, Burhanettin; Tanaka, Satoshi; Wiczer, David
  10. Preaching Water But Drinking Wine? Relative Performance Evaluation in International Banking By Dragan Ilić; Sonja Pisarov; Peter S. Schmidt
  11. Which Human Capital Characteristics Best Predict the Earnings of Economic Immigrants? By Hou, Feng; Picot, Garnett; Bonikowska, Aneta
  12. The Production and Stock of College Graduates for U.S. States By John V. Winters

  1. By: Mohrenweiser, Jens; Wydra-Sommaggio, Gaby; Zwick, Thomas
    Abstract: This paper addresses the puzzle how employers that invest in general human capital can gain an information advantage with respect to the ability of their employees when training is certified by credible external institutions. We apply an established model from the employer-learning literature and distinguish between two ability dimensions: cognitive and work-related ability. We apply this model to the German apprenticeship system and show that cognitive ability certified by external institutions at that the end of apprenticeship training can be signalled to outside employers. Apprenticeship graduates however cannot signal their work-related ability - measured by a small voluntary bonus paid by the training employer - to the outside market. We therefore show that the information advantage on work-related ability explains that training employers can positively select the apprentices they retain. As a consequence, this information advantage induces employers to invest in certified and transferable human capital.
    Keywords: training,employer learning,employer change,adverse selection,asymmetric information
    JEL: J24 J31 J62 J63 M52 M53
    Date: 2015
  2. By: Landeo, Claudia (University of Alberta, Department of Economics); Spier, Kathryn (Harvard Law School)
    Abstract: This paper reports the results of an experiment on incentive contracts for teams. The agents, whose efforts are complementary, are rewarded according to a sharing rule chosen by the principal. Depending on the sharing rule, the agents confront endogenous prisoner's dilemma or stag-hunt environments. Our main findings are as follows. First, we demonstrate that ongoing interaction among team members positively affects the principal's payoff . Greater team cooperation is successfully induced with less generous sharing rules in infinitely-repeated environments. Second, we provide evidence of the positive effects of communication on team cooperation in the absence of ongoing team interaction. Fostering communication among team members does not significantly affect the principal's payoff , suggesting that agents' communication is an imperfect substitute for ongoing team interaction. Third, we show that offering low sharing rules can back re. The agents are willing to engage in costly punishment (shirking) as retaliation for low offers from the principal. Our findings suggest that offering low sharing rules is perceived by the agents as unkind behavior and hence, triggers negative reciprocity.
    Keywords: Moral Hazard in Teams; Prisoners Dilemma; Stag-Hunt Games; Infinitely-Repeated Games; Communication; Reciprocity; Laboratory Experiments
    JEL: C72 C90 D86 K10 L23
    Date: 2015–08–25
  3. By: Christopher Cotton (Queen's University); Brent Hickman (University of Chicago); Joseph Price (Brigham Young University)
    Abstract: Pre-College human capital investment occurs within a competitive environment and depends on market incentives created by Affirmative Action (AA) in college admissions. These policies affect mechanisms for rank-order allocation of college seats, and alter the relative competition between blacks and whites. First, we develop a theory of AA in university admissions, showing how the effects of AA on human capital investment differ by student ability and demographic group. Second, we then conduct a field experiment designed to mimic important competitive aspects of investment prior to the college market. We pay students based on relative performance on a national mathematics exam in order to test the incentive effects of AA, and track student study efforts on an online mathematics practice and tutorial site. Consistent with theory, AA increases average human capital investment and exam performance for the majority of disadvantaged students targeted by the policy, by mitigating so-called "discouragement effects." The experimental evidence suggests that AA can promote greater equality of market outcomes and narrow achievement gaps at the same time.
    Keywords: Affirmative action, university admissions, field experiment, lab in the field, human capital, all-pay auction, studying, student effort
    JEL: J15 J24 C93 D44 D82
    Date: 2015–09
  4. By: KATO Takao; KODAMA Naomi
    Abstract: This paper uses unique firm-level panel data from Japan and provides new evidence on the possible impact on gender equality in the workplace of work-life balance (WLB) practices that are developed in part to enhance gender equality as well as performance-related pay (PRP) that is one of the most often discussed changes in the Japanese human resources management (HRM) system in recent years. Our fixed effect estimates indicate that daycare service assistance (onsite daycare services and daycare service allowances) has a gradual yet significant positive effect on gender equality in general as well as at the higher (management) levels. However, transition period part-time work is found to result in a decrease in the proportion of female directors (or exacerbating gender inequality in management). Turning to PRP, the fixed effect estimates suggest that a switch from the traditional wage system that rewards workers for their long-term skill development through on-the-job training within the firm to PRP that makes pay more sensitive to shorter-term performance will result in a fall in the proportion of female directors (amplifying gender inequality in management). We also find that the adverse effect on gender equality of PRP is fully mediated by having a more objective performance evaluation system; a more transparent decision making process; and a more systematic, explicit and formal training program. This finding can be interpreted as evidence pointing to gender discrimination in the workplace. In designing, developing and revising public policy instruments to achieve Prime Minister Shinzo Abe's ambitious policy goal of "increasing the share of women in leadership positions to at least 30% by 2020 in all fields in society," policy makers may need to pay particular attention to heterogeneous efficacy of specific WLB practices and the adverse effect of PRP as well as the mediating role played by management by objectives (MBO), information sharing, and systematic training program.
    Date: 2015–09
  5. By: A. Chadburn; J. Smith
    Abstract: The nature of work has changed and office designers are striving to find the ideal workplace design that meets the needs of knowledge workers. According to Thompson and Kay (2008) the issue of productivity is becoming of key interest in all sectors. In recent years, firms have begun to realise that a workplace environment that has been well designed is more likely to attract the highest calibre of worker and reduce staff attrition. (Gensler, 2005). A poorly-designed workplace can increase stress levels and negatively affect performance. As many as one- fifth of workplaces in the UK do not provide sufficient work place environments, and that at least one quarter of staff in the UK logged ‘serious’ complaints about factors such as poor layout, furniture, temperature and noise, among others (Myerson et al, 2011). Overall, British businesses are still considerably behind in creating workplaces that optimise employee satisfaction. (Arup, 2011). Improved workplace design can lead to a productivity increase Gensler (2005) and Bootle and Kalyan (2002) agree that billions of pounds are wasted each year due to the unproductive layout and design of some offices. There is a clear connection between the work environments and office users' productivity within the workplace. Most studies include the components of furniture, noise, lighting, temperature and spatial arrangements when considering that which affects productivity (Hameed and Amjad, 2009). However, there is no clear consensus as to which factors predominate. Employees of different generations respond differently to how their workplace environment is designed (Myerson et al, 2010). Almost 50% of today’s economy is knowledge-based and more workers are expected to be flexible, creative and communicative, (Greene and Myerson, 2011). The creation of work environments that result in satisfied and productive knowledge workers and end users requires information about user preferences concerning their work environments, and as the nature of work is changing, there is a need for updated research within this subject. Method: This paper will be based on research carried out on knowledge workers in 7 substantial companies within London. Results: Some results are already known and these include: employees are most productive when under pressure and in a buzzy environment; colleagues, design of office and quality of IT are the greatest factors that make employees unproductive.
    Keywords: Age Groups; Employee Productivity Drivers; Knowledge Workers; Productive Workplace; Workplace Design And Environment
    JEL: R3
    Date: 2015–07–01
  6. By: Lisa Östbring, Rikard Eriksson, Urban Lindgren; Rikard Eriksson; Urban Lindgren
    Abstract: The present article aims to show that multiple cognitive dimensions exist between employees in plants and that these multiple forms of potential cognitive relatedness interact in their influence on learning and plant performance. Because the success of a firm has come to be strongly associated with its ability to use the available resources (Penrose 1959), it has become increasingly important for firms to have just the right mix of competences. In the article, the knowledge and cognitive distance between employees in knowledge-intensive business services (KIBS) is measured in multiple ways – as formal knowledge, industry experience and past knowledge exposure. The different forms of cognitive distance are entered into pooled OLS regressions with year-, industry-, region-fixed effects and interaction terms to estimate the effects of various forms of cognition on plant performance. The results suggest that past knowledge experiences and formal education offer multiple channels for knowledge integration at the workplace and that the specific labor force knowledge characteristics present at a plant condition learning. It has been further shown that the organizational structure and flexibility associated with single-plant and multi-plant firms, respectively, generate different plant performance outcomes of knowledge variety. Moreover, we conclude that the commonly found negative effects of similarity in formal education on plant performance may be reduced by high levels of similarity in historical knowledge exposure or industry experience. These effects are stronger in multi-plant firms than in single-plant firms. We also find that high levels of human capital exert a reducing influence on the negative effects of high levels of cognitive similarity.
    Keywords: Cognitive proximity, plant performance, KIBS, human capital, proximity dimensions
    Date: 2015–09
  7. By: Alessandro De Chiara
    Abstract: This thesis consists of three papers which contribute to the literatures on regulation and organizational economics.<p><p><p>The first part of the dissertation addresses questions related to the procurement decisions of private and public organizations. In particular it focuses on how the anticipation of renegotiating the contractual terms during the execution of a procurement contract affects the initial arrangements between the parties. Renegotiation may involve the design itself of the goods which are procured, and not just their price or the time of their delivery. A plausible explanation for its pervasiveness is the existence of transaction costs which prevents contracts from being complete. This is especially true for more sophisticated and customized goods, such as new infrastructures or cars' and aircrafts' parts or components. Ex-post these goods may fail to fit the buyer's specific needs and/or may exhibit flaws unforeseen at the planning stage.<p><p><p>In the first two chapters, I show that the anticipation of ex-post adaptations has critical implications for many procurement choices, such as that of the contractual agreement, the award mechanism, and the delegation of the design task to the suppliers. Therefore, a proper inclusion of design failures into the analysis of procurement contracts can help broaden our understanding of the wide variety of procurement modes and outcomes observed in the real world. My analysis offers an explanation for the procurement practices adopted in complex manufacturing and construction industries. Moreover, it can provide useful guidance for public procurement. Governments face tight restrictions in their choices of the procurement modes and for this reason they should carefully evaluate whether or not to adopt the best practices of the private sector.<p><p><p>The second part of the dissertation concerns the optimal design of an organization. In many organizations the task of evaluating an agent's performance is delegated to a third party, a supervisor, who can opportunistically misreport information. The question of how the provision of incentives in hierarchies is affected by the supervisor's opportunism is of great importance since it can improve our understanding of the internal organization of firms and can have broad applications to regulatory design.<p><p><p>The third chapter of the thesis, co-authored with Luca Livio (ECARES, FNRS), contributes to this line of research by studying the optimal task a supervisor should be charged with in the presence of corruption concerns. We highlight the existence of a trade-off between monitoring the agent's effort choice and auditing it ex-post, which arises when the two faces of corruption, collusion and extortion, are present.
    Keywords: Equilibrium (Economics); Business enterprises; Public utilities; Equilibre (Economie politique); Entreprises; Services publics; Regulation; Procurement; Organizational Economics
    Date: 2015–06–17
  8. By: Guy Tchuente
    Abstract: This paper assesses the relationship between courses taken in high school and college major choice. Using High School and Beyond survey data, I study the empirical relationship between college performance and different types of courses taken during high school. I find that students sort into college majors according to subjects in which they acquired more skills in high school. However, I find a U-shaped relationship between the diversification of high school courses a student takes and their college performance. The underlying relation linking high school to college is assessed by estimating a structural model of high school human capital acquisition and college major choice. Policy experiments suggest that taking an additional quantitative course in high school increases the probability that a college student chooses a science, technology, engineering, or math major by four percentage points.
    Keywords: human capital; discrete choice; college major
    JEL: J24 I21
    Date: 2015–07
  9. By: Guvenen, Fatih (University of Minnesota); Kuruscu, Burhanettin (University of Toronto); Tanaka, Satoshi (University of Queensland); Wiczer, David (Federal Reserve Bank of St. Louis)
    Abstract: What determines the earnings of a worker relative to his peers in the same occupation? What makes a worker fail in one occupation but succeed in another? More broadly, what are the factors that determine the productivity of a worker-occupation match? In this paper, we propose an empirical measure of skill mismatch for a worker-occupation match, which sheds light on these questions. This measure is based on the discrepancy between the portfolio of skills required by an occupation and the portfolio of abilities possessed by a worker for learning those skills. This measure arises naturally in a dynamic model of occupational choice and human capital accumulation with multidimensional skills and Bayesian learning about one’s ability to learn these skills. In this model, mismatch is central to the career outcomes of workers: it reduces the returns to occupational tenure, and it predicts occupational switching behavior. We construct our empirical analog by combining data from the National Longitudinal Survey of Youth 1979 (NLSY79), the Armed Services Vocational Aptitude Battery (ASVAB) on workers, and the O*NET on occupations. Our empirical results show that the effects of mismatch on wages are large and persistent: mismatch in occupations held early in life has a strong negative effect on wages in future occupations. Skill mismatch also significantly increases the probability of an occupational switch and predicts its direction in the skill space. These results provide fresh evidence on the importance of skill mismatch for the job search process.
    Keywords: Skill mismatch; match quality; Mincer regression; ASVAB; O*NET; occupational switching
    JEL: E24 J24 J31
    Date: 2015–09–02
  10. By: Dragan Ilić; Sonja Pisarov; Peter S. Schmidt (University of Basel)
    Abstract: Relative performance evaluation (RPE) is, at least on paper, enjoying widespread popularity in determining the level of executive compensation. Yet existing empirical evidence of RPE is decidedly mixed. Two principal explanations are held responsible for this discord. A constructional challenge arises from intricacies of identifying the correct peers. And on a simpler note, corporate commitments to RPE could be mere exercises in empty rhetoric. We address both issues and test the use of RPE in a new sample of large international non-U.S. banks. Taken as a whole, the banks in our sample show moderate evidence consistent with RPE. We report stronger evidence once we investigate the subsample of banks that disclose the use of peers in their compensation schemes. This finding lends support to the credibility and thus informational value of RPE commitments. Digging deeper, we find that RPE usage is driven by firm size and growth options.
    Keywords: Relative Performance Evaluation, Executive Compensation, Peers, Banks, Disclosure
    JEL: J33 D86 G3 G21
    Date: 2015
  11. By: Hou, Feng; Picot, Garnett; Bonikowska, Aneta
    Abstract: While an extensive literature examines the association between immigrants' characteristics and their earnings in Canada, there is a lack of knowledge regarding the relative importance of various human capital factors, such as language, work experience and education when predicting the earnings of economic immigrants. The decline in immigrant earnings since the 1980s, which was concentrated among economic immigrants, promoted changes to the points system in the early 1990s and in 2002, in large part, to improve immigrant earnings. Knowledge of the relative role of various characteristics in determining immigrant earnings is important when making such changes. This paper addresses two questions. First, what is the relative importance of observable human capital factors when predicting earnings of economic immigrants (principal applicants), who are selected by the points system? Second, does the relative importance of these factors vary in the short, intermediate, and long terms? This research employs Statistics Canada's Longitudinal Immigration Database (IMDB).
    Keywords: Education, training and learning, Ethnic diversity and immigration, Labour, Labour market and income, Wages, salaries and other earnings
    Date: 2015–08–26
  12. By: John V. Winters (Oklahoma State University)
    Abstract: The stock of human capital in an area is important for regional economic growth and development. However, highly educated workers are often quite mobile and there is a concern that public investments in college graduates may not benefit the state if the college graduates leave the state after finishing their education. This paper examines the relationship between the production of college graduates from a state and the stock of college graduates residing in the state using microdata from the decennial census and American Community Survey. The relationship is examined across states and across cohorts within states. The descriptive analysis suggests that the relationship between the production and stock of college graduates has increased over time and is nearly proportional in recent years. Instrumental variables methods are used to estimate causal effects. The preferred IV results yield an average point estimate for the production-stock relationship of 0.52, but the effect likely decreases with age.
    Keywords: college graduates; human capital; migration; higher education policy
    JEL: I25 J24 R23
    Date: 2015–07

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