nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2015‒09‒26
ten papers chosen by
Patrick Kampkötter
Universität zu Köln

  1. Strive to be First or Avoid Being Last: An Experiment on Relative Performance Incentives By Dutcher, E. Glenn; Balafoutas, Loukas; Lindner, Florian; Ryvkin, Dmitry; Sutter, Matthias
  2. Work-related ability as source of information advantages of training employers By Mohrenweiser, Jens; Wydra-Sommaggio, Gaby; Zwick, Thomas
  3. Managerial Performance Incentives and Firm Risk during Economic Expansions and Recessions By Elif Sisli Ciamarra; Tanseli Savaser
  4. Multidimensional Skill Mismatch By Guvenen, Fatih; Kuruscu, Burhanettin; Tanaka, Satoshi; Wiczer, David
  5. Human Capital and Optimal Redistribution By Julien Prat; Winfried Koeniger
  6. Care more, earn less? The association between care leave for sick children and wage among Swedish parents By Boye, Katarina
  7. Making the Most of Diversity: How Collectivism Mutes the Disruptive Effects of Demographic Heterogeneity on Group Performance By Chatman, Jennifer A.; Sherman, Eliot L.; Doerr, Bernadette M.
  8. The ABCs of financial education : experimental evidence on attitudes, behavior, and cognitive biases By Carpena,Fenella; Cole,Shawn A.; Shapiro,Jeremy; Zia,Bilal Husnain
  9. Sticky assessments – the impact of teachers’ grading standard on pupils’ school performance By Tamas Keller
  10. Which Human Capital Characteristics Best Predict the Earnings of Economic Immigrants? By Hou, Feng; Picot, Garnett; Bonikowska, Aneta

  1. By: Dutcher, E. Glenn (University of Central Missouri); Balafoutas, Loukas (University of Innsbruck); Lindner, Florian (University of Innsbruck); Ryvkin, Dmitry (Florida State University); Sutter, Matthias (University of Cologne)
    Abstract: We utilize a laboratory experiment to compare effort provision under optimal tournament contracts with different distributions of prizes which motivate agents to compete to be first, avoid being last, or both. We find that the combined tournament contract incorporating both incentives at the top and at the bottom induces the highest effort, especially in larger groups. Avoiding being last produces the lowest variance of effort and is more effective at motivating employees compared to competing for the top.
    Keywords: tournament, winner, loser, contract, experiment, learning
    JEL: M52 J33 J24 D24 C90
    Date: 2015–09
  2. 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
  3. By: Elif Sisli Ciamarra (Brandeis University); Tanseli Savaser (Bilkent University)
    Abstract: We argue that the relationship between managerial pay-for-performance incentives and risk taking is procyclical. We study the relationship between incentives provided by stock-based compensation and …rm risk for U.S. non-…nancial corporations over the two business cycles between 1992 and 2009. We show that a given level of pay-for-performance incentives results in signi…cantly lower …rm risk when the economy is in a downturn. The documented procyclical relationship between incentives and risk taking is consistent with state-dependent risk aversion. Our …ndings contribute to the literature on the depres- sive e¤ects of performance incentives on …rm risk by documenting the importance of the interaction between performance incentives and risk aversion.
    Keywords: executive compensation; risk taking; equity-based compensation; macro- economy Corresponding
    JEL: G01 G3 M52
    Date: 2015–09
  4. By: Guvenen, Fatih (Federal Reserve Bank of Minneapolis); 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: 2015–09–04
  5. By: Julien Prat (CREST); Winfried Koeniger (University of St.Gallen)
    Abstract: We characterize optimal redistribution in a dynastic family model with human capital. We show how the government can affect the trade-off between equality and incentives by changing the amount of observable human capital. We provide an intuitive decomposition for the wedge between human-capital investment in the laissez faire and the social optimum. This wedge differs from the wedge for bequests because: (i) returns to human capital depend on the non-insurable risk associated with children's abilities, (ii) human capital may improve or worsen the incentive problem depending on its degree of complementarity with innate ability.
    Date: 2015
  6. By: Boye, Katarina (Swedish Institute for Social Research, Stockholm University)
    Abstract: A number of studies have shown that women’s and men’s wages relate to parenthood in general and to parental leave in particular, but we know little about the possible wage impact of leave to care for sick children, which is a part of the Swedish parental leave system. On the one hand, care leave may influence human capital and real or perceived work capacity similarly to parental leave and send the employer the same signals about work commitment and responsibilities outside of work. On the other hand, important differences, including timing, frequency and predictability, between care leave and parental leave influence paid work. This study uses Swedish register data to analyse the association between care leave and wages among mothers and fathers who had their first child in 1994. The results show that care leave is associated with a lower wage, particularly among men, up to 13 years after the birth of the first child. One reason for the gender difference in the association between care leave and wage may be that men’s care leave has a stronger signalling effect compared with women’s care leave.
    Keywords: Care leave; parental leave; wages; gender equality; family; labour market
    JEL: J13 J16
    Date: 2015–09–14
  7. By: Chatman, Jennifer A.; Sherman, Eliot L.; Doerr, Bernadette M.
    Abstract: We advance social identity theory by hypothesizing that the content of demographic attributes on which members differ, and not just their distribution, influences the relationship between a group’s composition and its performance. We test this theoretical logic, using both laboratory and field data, by investigating groups with different distributions of members (from the same or different nations) and cultural orientations (individualistic or collectivistic). We hypothesize that, because a collectivistic orientation promotes group identification, a focus on collective goals, and a sense of being an interchangeable exemplar of the group, it also reduces the polarizing effects of demographic heterogeneity and improves group performance. Using an experimental design, we find that subjects primed with a collectivistic rather than an individualistic orientation see less distinction between nationally homogeneous and heterogeneous groups, and expect the group to be more successful. We also analyze archival data representing 5,460 Himalayan climbing expeditions and find that expeditions characterized by higher levels of national heterogeneity are more likely to reach the summit if more members hail from collectivistic rather than individualistic countries. Simultaneously considering the distribution and content of attributes on which members differ will accelerate the evolution of a comprehensive theory of social identity processes and consequences.
    Keywords: Social and Behavioral Sciences
    Date: 2015–01–28
  8. By: Carpena,Fenella; Cole,Shawn A.; Shapiro,Jeremy; Zia,Bilal Husnain
    Abstract: This paper uses a large scale field experiment in India to study attitudinal, behavioral, and cognitive constraints that stymie the link between financial education and financial outcomes. The study complements financial education with (i) participant classroom motivation with pay for performance on a knowledge test, (ii) intensity of treatment with personalized financial counseling, and (iii) behavioral nudges with financial goal setting. The analysis finds no impact of pay for performance but significant effects of both counseling and goal setting on real financial outcomes. These results identify important complements to financial education that can bridge the gap between financial knowledge and financial behavior change.
    Keywords: Access to Finance,Curriculum&Instruction,Financial Literacy,Effective Schools and Teachers,Access&Equity in Basic Education
    Date: 2015–09–15
  9. By: Tamas Keller (TARKI Social Research Institute and Research Centre for Educational and Network Studies, Hungarian Academy of Sciences)
    Abstract: This paper argues that school grades cannot be interpreted solely as a reward for a given school performance, since they also reflect teachers’ ratings of pupils. Grades therefore contain valuable information about pupils’ own – usually unknown – ability. The incorporated assessment in grade might be translated into self-assessment, which could influence the effort that pupils invest in education. Getting discounted grades in year 6 for a given level of math performance assessed using a PISA-like test has a positive effect on math test scores in year 8 of elementary education and also influences later outcomes in secondary education. The empirical analysis tries to minimize the possible bias caused by the measurement error in year 6 test scores (unmeasured ability) and employs classroom fixed-effect instrumental variable (IV) regression and difference-in-difference models. The main analysis is based on a unique Hungarian individual-level panel dataset with two observations about the same individual – one in year 6 (12/13 years old) and again two years later, in year 8 (14/15 years old) of elementary education. The data for three entire school cohorts is analyzed – approximately 140,000 individuals. Highlights • Examines the impact of teachers’ grading standards on pupils’ school performance • Takes advantage of having two different measures of pupils’ math knowledge: teacher-given grades and centralized test scores • Assumes that grades are more than test scores, since they incorporate teachers’ ratings • Tries to estimate teachers’ grading standards and minimizes unmeasured ability bias by employing IV regression and diff-in-diff approaches • Finds that year 6 grades positively influence year 8 test scores and year 10 outcomes • Argues that teachers’ assessments translate to self-assessment, which influences pupils’ effort • Concludes that grading standards in elementary school accompany pupils to secondary school
    Keywords: School performance; Inflated school grades; Feedback, Good teacher; Educational panel data; Hungarian National Assessment of Basic Competencies
    JEL: I20 I21 J24
    Date: 2015–07
  10. 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

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