nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2015‒12‒28
thirteen papers chosen by
Patrick Kampkötter
Universität zu Köln

  1. Do Firms Pay Bonuses to Protect Jobs? By Balázs Reizer
  2. Discretion in Hiring By Mitchell Hoffman; Lisa B. Kahn; Danielle Li
  3. Training and Search On the Job By Rasmus Lentz; Nicolas Roys
  4. The Relationship between Establishment Training and the Retention of Older Workers: Evidence from Germany By Peter B. Berg; Mary K. Hamman; Matthew M. Piszczek; Christopher J. Ruhm
  5. Productivity and Organization in Portuguese Firms By Lorenzo Caliendo; Giordano Mion; Luca David Opromolla; Esteban Rossi-Hansberg
  6. The Impact of 'A - Day' on Executive Pensions and Pay for Performance By Damon Morris; Ian Gregory-Smith; Brian Main; Alberto Montagnoli; Peter Wright
  7. Teleological Dynamics of Organizational Performance: From Process to Practice and Performance By Chatterjee, Sidharta
  8. Mismatch of Talent Evidence on Match Quality, Entry Wages, and Job Mobility By Fredriksson, Peter; Hensvik, Lena; Nordström Skans, Oskar
  9. In Search of Ideas: Technological Innovation and Executive Pay Inequality By Carola Frydman; Dimitris Papanikolaou
  10. The Option Value of Human Capital: Higher Education and Wage Inequality By Sang Yoon Lee; Yongseok Shin; Donghoon Lee
  11. Occupational segregation and women's job satisfaction By Alfred Michael Dockery; Sandra Buchler
  12. Trade Shocks, Firm Hierarchies and Wage Inequality By Benjamin Friedrich
  13. Immigration, Human Capital Formation and Endogenous Economic Growth By Isaac Ehrlich; Jinyoung Kim

  1. By: Balázs Reizer
    Abstract: A large share of workers receives bonus payments besides their base wage. The benefits of flexible wage components in renumeration are twofolded: they can incentivize workers and make it easier to adjust wages downward in response to negative shocks. Using data on bonus payments of Hungarian workers from linked employer-employee data, I disentangle the importance of these two factors to assess their respective importance. First, I show that bonus payments flexibly adjust to the revenue shocks of firms. At the same time, the separation rate of workers without bonuses do not react more to revenue changes than the separation rate of workers with bonuses. Bonus paying firms are shown to be financially more stable, larger and more productive, and they have less volatile revenue than firms not paying bonuses. These facts are consistent with a wage posting model with incentive contracting, but they are hard to reconcile with models emphasizing the role of bonus payments in alleviating wage rigidity. These results indicate that wage flexibility regulations may not affect the employment responses of firms to negative shocks.
    Date: 2015–12–23
  2. By: Mitchell Hoffman; Lisa B. Kahn; Danielle Li
    Abstract: Who should make hiring decisions? We propose an empirical test for assessing whether firms should rely on hard metrics such as job test scores or grant managers discretion in making hiring decisions. We implement our test in the context of the introduction of a valuable job test across 15 firms employing low-skill service sector workers. Our results suggest that firms can improve worker quality by limiting managerial discretion. This is because, when faced with similar applicant pools, managers who exercise more discretion (as measured by their likelihood of overruling job test recommendations) systematically end up with worse hires.
    JEL: J24 M51
    Date: 2015–11
  3. By: Rasmus Lentz; Nicolas Roys
    Abstract: The paper studies human capital accumulation over workers' careers in an on the job search setting with heterogenous firms. In renegotiation proof employment contracts, more productive firms provide more training. Both general and specific training induce higher wages within jobs, and with future employers, even conditional on the future employer type. Because matches do not internalize the specific capital loss from employer changes, specific human capital can be over-accumulated, more so in low type firms. While validating the Acemoglu and Pischke (1999) mechanisms, the analysis nevertheless arrives at the opposite conclusion: That increased labor market friction reduces training in equilibrium.
    JEL: D21 D43 D83 E24 J24 J31 J33 J41 J62 J63 J64
    Date: 2015–11
  4. By: Peter B. Berg; Mary K. Hamman; Matthew M. Piszczek; Christopher J. Ruhm
    Abstract: In the coming years, a substantial portion of Germany’s workforce will retire, making it difficult for businesses to meet human capital needs. Training older workers may be a successful strategy for managing this demographic transition. This study examines relationships between establishment training programs, wages, and retirement among older men and women. Using unique matched establishment-employee data from Germany, the authors find that when establishments offer special training programs targeted at older workers, women—and especially lower wage women—are less likely to retire. Results suggest this relationship may be due to greater wage growth. For men, findings suggest establishment offer of inclusion in standard training programs may improve retention of low wage men, but analysis of pre-existing differences in establishment retirement patterns suggests this relationship may not be causal. Our research suggests targeted training programs likely play an important role in retaining and advancing careers of low wage older women.
    JEL: J15 J18 J2 J21 J24 J26
    Date: 2015–11
  5. By: Lorenzo Caliendo; Giordano Mion; Luca David Opromolla; Esteban Rossi-Hansberg
    Abstract: The productivity of firms is, at least partly, determined by a firm's actions and decisions. One of these decisions involves the organization of production in terms of the number of layers of management the firm decides to employ. Using detailed employer-employee matched data and firm production quantity and input data for Portuguese firms, we study the endogenous response of revenue-based and quantity-based productivity to a change in layers: a firm reorganization. We show that as a result of an exogenous demand or productivity shock that makes the firm reorganize and add a management layer, quantity based productivity increases by about 4%, while revenue-based productivity drops by more than 4%. Such a reorganization makes the firm more productive, but also increases the quantity produced to an extent that lowers the price charged by the firm and, as a result, its revenue-based productivity.
    Keywords: productivity, organization, wages, managers, layers, TFP, firm size
    JEL: D22 D24 L23 F16 J24 J31
    Date: 2015–12
  6. By: Damon Morris (Department of Economics, University of Sheffield); Ian Gregory-Smith (Department of Economics, University of Sheffield); Brian Main (Business School, University of Edinburgh); Alberto Montagnoli (Department of Economics, University of Sheffield); Peter Wright (Department of Economics, University of Sheffield)
    Abstract: This paper evaluates the impact of the ‘A-day’ pensions simplification legislation introduced in the UK in 2006. This reform exogenously affected the cost of pension provision for firms whose executives had accumulated pensions benefits in excess of the prescribed limit. We find a strong reaction in the form of pension provision in a sample of UK executive directors. After A-day, many executives saw their defined benefit scheme replaced with supplementary cash payments. This had the unintended consequence of significantly decreasing the relationship between executive pay and firm performance for those executives affected by the reform.
    Keywords: Executive compensation; Executive pensions; Pay for Performance; A-day
    JEL: J32 J33 M12 M52
    Date: 2015–12
  7. By: Chatterjee, Sidharta
    Abstract: Workforce education forms one of the core aspects of organizational learning which aims for performance as well as efficiency. Learning is goal oriented in business organizations. Organizations activities are highly oriented towards customer satisfaction. Organizations learn from practice and delivery of services to meet consumer needs and necessities. Perfection, efficiency and smart practices define today’s multinational organizational culture. But how multinational organizations achieve such perfections in their business operations? This paper addresses this issue by linking teleological aspects of learning and practice to performance, adoption of routines, and learning-induced adaptation in order to explain how they achieve “perfection” in practice and operations. The paper furthermore attempts to study a particular aspect of organizational (teleological perfectionism) process by modeling scenarios which define goal oriented organizational learning and adaptation, and underpins how such teleological processes effectively benefits organizations in the long run. Conclusions drawn up from an example being modeled in this paper suggests that the role of teleology, or teleological dynamics play significant role in shaping today’s organizations and help explain some (or high) degree of perfectionism in their operations.
    Keywords: Teleological perfectionism, learning, motivation, routines
    JEL: L20 M16
    Date: 2015–12–24
  8. By: Fredriksson, Peter (Stockholm University, UCLS, IZA, and IFAU); Hensvik, Lena (Institute for Evaluation of Labour Market and Education Policy (IFAU), Uppsala Center for Labor Studies (UCLS), and CESifo); Nordström Skans, Oskar (Uppsala University, UCLS, IFAU and IZA)
    Abstract: We examine the direct impact of idiosyncratic match quality on entry wages and job mobility using unique data on worker talents matched to job-indicators and individual wages. Tenured workers are clustered in jobs with high job-specific returns to their types of talents. We therefore measure mismatch by how well the types of talents of recent hires correspond to the talents of tenured workers performing the same jobs. A stylized model shows that match quality has a smaller impact on entry wages but a larger impact on separations and future wage growth if matches are formed under limited information. Empirically, we find such patterns for inexperienced workers and workers who were hired from non-employment, which are also groups where mismatch is more pronounced on average. Most learning about job-specific mismatch happens within a year. Experienced job-to-job movers appear to match under much less uncertainty. They are better matched on entry and mismatch have a smaller eect on their initial separation rates and later wage growth. Instead, match quality is priced into their starting wages.
    Keywords: Matching; Job search; Comparative advantage; Employer learning
    JEL: J24 J31 J62 J64
    Date: 2015–12–16
  9. By: Carola Frydman; Dimitris Papanikolaou
    Abstract: We develop a general equilibrium model that delivers realistic fluctuations in both the level as well as the dispersion in executive pay as a result of changes in the technology frontier. Our model recognizes that executives add value to the firm not only by participating in production decisions, but also by identifying new investment opportunities. The economic value of these two distinct components of the executive's job varies with the state of the economy. Improvements in technology that are specific to new vintages of capital raise the skill price of discovering new growth prospects -- and thus raise the compensation of executives relative to workers. If most of the dispersion in managerial skill lies in the ability to find new projects, dispersion in executive pay will also rise. Our model delivers testable predictions about the relation between executive pay and growth opportunities that are quantitatively consistent with the data.
    JEL: E22 G10 G30 J24 J3 M52
    Date: 2015–12
  10. By: Sang Yoon Lee; Yongseok Shin; Donghoon Lee
    Abstract: Going to college is a risky investment in human capital. However, we highlight two options inherently embedded in college education that mitigate this risk: (i) college students can quit without completing four-year degrees after learning about their post-graduation wages and (ii) college graduates can take jobs that do not require four-year degrees (i.e., underemployment). These options reduce the chances of falling in the lower end of the wage distribution as a college graduate, rendering standard mean-variance calculations misleading. We show that the interaction between these options and the rising wage dispersion, especially among college graduates, is key to understanding the muted response of college enrollment and graduation rates to the substantial increase in the college wage premium in the United States since 1980. Furthermore, we find that subsidies inducing marginal students to attend colleges will have a negligible net benefit: Such students are far more likely to drop out of college or become underemployed even with a four-year degree, implying only small wage gains from college education.
    JEL: E24 I24 J24
    Date: 2015–11
  11. By: Alfred Michael Dockery (Curtin University); Sandra Buchler (Goethe university)
    Abstract: Data on men and women’s job satisfaction conditional upon the degree of feminisation of their occupation are used to explore potential causes and implications of occupational segregation by gender in the Australian labour market. We find some evidence for the notion of ‘women’s work’ - that certain occupations are highly feminised because women prefer the type of work done in those occupations. However, this primarily applies to mothers, older women and wives and the results also offer strong support for the view that occupational segregation is generated by societal norms around the roles allocated to men and women. In particular, patterns in satisfaction with hours of work and with pay in highly feminised occupations are consistent with societal norms in which the work of married women and of mothers is seen as secondary to that of their male partner’s. In contrast to suggestions in some of the existing Australian literature, the results also clearly indicate that more highly feminised occupations are relatively poorly paid, other things held equal.
    Keywords: Occupational segregation, gender, job satisfaction, discrimination, occupational choice
    JEL: J28 J71 J24
    Date: 2015–12
  12. By: Benjamin Friedrich (Yale University, CT, USA and Department of Economics and Business Economics, Aarhus University, Denmark)
    Abstract: This study uses administrative employer-employee data and firm-level trade data from Denmark to provide evidence for a novel mechanism through which trade affects wage inequality: changes in firm hierarchies. This mechanism is motivated by the empirical fact that within-firm wage variation across the hierarchical levels of top manager, middle manager, supervisor and worker accounts for an important component of wage inequality. It is comparable in magnitude to wage differences across firms. To identify the causal effect of trade shocks on firm hierarchies and wage inequality, I use two distinct research designs for firm-level trade shocks—one based on foreign demand and transportation costs, and the other using the Muslim boycott of Danish exports after the Cartoon crisis. Both identification strategies suggest robust effects of trade shocks on within-firm inequality through changes in hierarchies. Consistent with models of knowledge-based or incentive-based hierarchies, firm-level trade shocks influence organizational choices through production scale. Adding a hierarchy layer significantly increases inequality within firms, ranging from 2% for the 50-10 wage gap to 4.7% for the 90-50 wage gap.
    Keywords: Empirical Studies of Trade, Trade and Labor Market Interactions , Wage Level and Structure, Wage Differentials, Firm Organization and Market Structure, Organization of Production
    JEL: F14 F16 J31 L22 L23
    Date: 2015–12–18
  13. By: Isaac Ehrlich; Jinyoung Kim
    Abstract: Census data from international sources covering 77% of the world’s migrant population indicate that the skill composition of migrants in major destination countries, including the US, has been rising over the last 4 decades. Moreover, the population share of skilled migrants has been approaching or exceeding that of skilled natives. We offer theoretical propositions and empirical tests consistent with these trends via a general-equilibrium model of endogenous growth where human capital, population, income growth and distribution, and migration trends are endogenous. We derive new insights about the impact of migration on long-term income growth and distribution, and the net benefits to natives in both destination and source countries.
    JEL: F22 F43 O15 O4
    Date: 2015–11

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