nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2016‒01‒03
eleven papers chosen by
Patrick Kampkötter
Universität zu Köln

  1. Psychological Incentives, Financial Incentives, and Risk Attitudes in Tournaments: An Artefactual Field Experiment By Cadsby, Bram; Engle-Warnick, Jim; Fang, Tony; Song, Fei
  2. Pay Schemes, Bargaining, and Competition for Talent By Lindbeck, Assar; Weibull, Jörgen
  3. Do They Find You on Facebook? Facebook Profile Picture and Hiring Chances By Baert, Stijn
  4. Hidden Action and Outcome Contractibility: An Experimental Test of Contract Theory By Hoppe, Eva I; Schmitz, Patrick W
  5. Are Working Time Accounts Beneficial for German Establishments? By Bellmann, Lutz; Hübler, Olaf
  6. Mismatch of Talent Evidence on Match Quality, Entry Wages, and Job Mobility By Fredriksson, Peter; Hensvik, Lena; Nordström Skans, Oskar
  7. Building people-oriented organizations By van Dierendonck, D.
  8. Taste for Competition and the Gender Gap Among Young Business Professionals By Ernesto Reuben; Paola Sapienza; Luigi Zingales
  9. Seniority rules, worker mobility and wages: Evidence from multi-country linked employer-employee data By Böckerman, Petri; Skedinger, Per; Uusitalo, Roope
  10. Are Starting Wages Reduced by an Insurance Premium for Preventing Wage Decline? Testing the Prediction of Harris and Holmstrom (1982) By Hartog, Joop; Raposo, Pedro
  11. Managers and Productivity Differences By Guner, Nezih; Parkhomenko, Andrii; Ventura, Gustavo

  1. By: Cadsby, Bram (University of Guelph); Engle-Warnick, Jim (McGill University); Fang, Tony (Memorial University of Newfoundland); Song, Fei (Ryerson University)
    Abstract: Tournaments are widely used to assign bonuses and determine promotions because of the link between relative performance and rewards. However, performing relatively well (poorly) may also yield psychological benefits (pain). This may also stimulate effort. Through a real-effort artefactual field experiment with factory workers and university students as a comparison group in China, we examine how both psychological and financial incentives, together with attitudes toward risk, may influence motivation and performance. We provided performance-ranking information both privately and publicly, with and without rank-based financial incentives. Our results show that performance-ranking information had a significant motivational effect on average performance for students, but not for that of workers. Adding financial incentives based on rank provided little evidence of further improvement. Much of the difference between workers and students can be explained by differences in attitudes toward risk. Indeed, for both groups financial and psychological incentive effects are both inversely related to individual levels of risk aversion, and are positive and significant both for workers and for students who are sufficiently risk-tolerant.
    Keywords: tournament, peer pressure, performance feedback, social comparison, incentives, risk aversion, artefactual field experiment
    JEL: J30 J24 J33 C93 C91
    Date: 2015–12
  2. By: Lindbeck, Assar (Research Institute of Industrial Economics (IFN)); Weibull, Jörgen (Department of Economics)
    Abstract: The paper provides a framework for analysis of remuneration to agents whose task is to make well-informed decisions on behalf of a principal, with managers in large corporations as the most prominent example. The principal and agent initially bargain over the pay scheme to the latter. The bargaining outcome depends both on competition for agents and on the relative bargaining power of the two parties, given their outside options, thus allowing for the possibility that the agent may be the current CEO who may have considerable power. Having signed a contract, the agent chooses how much effort to make to acquire information about the project at hand. This information is private and the agent uses it in his subsequent decision whether or not to invest in a given project. In model A the agent’s effort to acquire information is exogenous, whereas in model E it is endogenous. Model A lends no support for other payment schemes than flat salaries is weak. Model E contains a double moral hazard problem; how much information to acquire and what investment decision to make. As a consequence, the equilibrium contracts in model E involve both bonuses and penalties. We identify lower and upper bounds on these, and study how the bonus and bonus rate depend on competition and bargaining power. We also analyze the nature of contracts when the agent is overconfident.
    Keywords: Principal-agent; Investment; Endogenous uncertainty; Contract; Bonus; Penalty
    JEL: D01 D82 D86 G11 G23 G30
    Date: 2015–12–21
  3. By: Baert, Stijn (Ghent University)
    Abstract: We investigate whether the publicly available information on Facebook about job applicants affects employers' hiring decisions. To this end, we conduct a field experiment in which fictitious job applications are sent to real job openings in Belgium. The only characteristic in which these candidates differ is the unique Facebook profile that can be found online with their name. Candidates with the most beneficial Facebook picture obtain approximately 39% more job interview invitations compared to candidates with the least beneficial picture. In addition, we find suggestive evidence for a higher effect of Facebook profile picture appearance on hiring chances when candidates are highly educated and when recruiters are female.
    Keywords: hiring, screening, Facebook, Internet, personality, attractiveness
    JEL: C93 D83 J24 J79 L86
    Date: 2015–12
  4. By: Hoppe, Eva I; Schmitz, Patrick W
    Abstract: We present the first large-scale laboratory experiment designed to capture the canonical hidden action problem as studied in contract theory, comparing treatments with unobservable effort to benchmark treatments with verifiable effort. In line with contract theory, when effort is a hidden action, the chosen effort levels crucially depend on the contractibility of the outcome. In our one-shot experiment the players endogenously negotiate contracts. In the absence of communication, they typically avoid gift-exchange situations. Even when the outcome is contractible and the hidden action problem is typically overcome with incentive-compatible contracts, communication is helpful since it may reduce strategic uncertainty.
    Keywords: Contract theory; Hidden action; Incentive theory; Laboratory experiments; Moral hazard
    JEL: C72 C92 D82 D86
    Date: 2015–12
  5. By: Bellmann, Lutz (Institute for Employment Research (IAB), Nuremberg); Hübler, Olaf (Leibniz University of Hannover)
    Abstract: This contribution investigates whether working time accounts are beneficial for the performance of German establishments. Based on the representative German Establishment Panel of the Institute for Employment Research during the period 2008-2013, effects on productivity, wages, sales, firm size, investments, further training, labor mobility, working hours, operating surplus and profits as performance indicators are estimated. Heterogeneity and robustness are investigated by a subgroup analysis where we distinguished between establishments with a high and a low share of qualified workers, between firms with strong and weak sales fluctuations. Additionally, different lengths of the agreed compensation period and reasons for longer time out periods of the employees are considered. Unobserved firm effects as well as interdependencies between important performance indicators and working time accounts are analyzed. OLS estimates, Lewbel's instrumental estimator and IV panel approaches are applied. As major results we find that productivity and investments are positively correlated with working time accounts. No significant effects of working time accounts can be detected on wages, the number of employees and operating surplus of IV panel estimates. However, on average, we find a tendency towards negative effects on profits. This result is less likely in establishments with a high share of skilled workers. Under strong sales fluctuations we find positively significant on the operating surplus. These mixed results hint to a conflict between the employers and employees interests concerning working time accounts that result in compromise solutions.
    Keywords: flexible working time, working time accounts, establishments, productivity, wages, labor mobility, operating surplus, profits, share of qualified workers, sales fluctuations, compensation period
    JEL: C22 D21 J21 J22
    Date: 2015–12
  6. By: Fredriksson, Peter (Uppsala Center for Labor Studies); Hensvik, Lena (Uppsala Center for Labor Studies); Nordström Skans, Oskar (Uppsala Center for Labor Studies)
    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 effect 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: 2015–11–18
  7. By: van Dierendonck, D.
    Abstract: Within organizations, work and the way work is organized is rapidly changing. Driven by increasing globalization, the virtualization brought on by the internet and the need for constant innovation is increasing the pace of work and our interconnectedness. Within organizations, work and the way work is organized is rapidly changing. It requires a new look at HR practices using a strong people-orientated approach. This inaugural address puts forward some key HR challenges at various interconnected levels. It argues for a holistic focus, broadening the HR-KPIs to include employee flourishing; an organizational culture build on the principles of servant leadership, and a renewed look at HR practices with a strong link to the context outside the organization. This perspective emphasizes the creation of conditions for continuous growth and development of all people within organizations, underlining the importance of an enhanced sense of meaningfulness and social recognition.
    Keywords: Human capital, Globalization, Rhineland model, Humane capitalism, Anglo-Saxon model, Aging workforce, New ways of working, Individualized compensation, Job satisfaction, Commitment, Servant Leadership
    JEL: A14 M12 J28 J62 L20
    Date: 2015–12–18
  8. By: Ernesto Reuben; Paola Sapienza; Luigi Zingales
    Abstract: Using an incentivized measure of test for competition, this paper investigates whether this taste explains subsequent gender differences in earnings and industry choice in a sample of high-ability MBA graduates. We find that “competitive” individuals earn 9% more than their less competitive counterparts do. Moreover, gender differences in taste for competition explain around 10% of the overall gender gap. We also find that competitive individuals are more likely to work in high-paying industries nine years later, which suggests that the relation between taste for competition and earnings persists in the long run. Lastly, we find that the effect of taste for competition emerges over time when MBAs and firms interact with each other.
    JEL: C93 D81 D84 I21 J16
    Date: 2015–11
  9. By: Böckerman, Petri; Skedinger, Per; Uusitalo, Roope
    Abstract: We construct a multi-country employer-employee data to examine the consequences of employment protection. We identify the effects by comparing worker exit rates between units of the same firm that operate in two countries that have different seniority rules. The results show that last-in-first-out rules reduce dismissals of older, more senior workers, especially in shrinking multinational firms, and increase their bargaining power, resulting in a steeper seniority-wage profile.
    Keywords: Multi-country linked employer-employee data, Employment protection legislation, Seniority rules
    JEL: J08 J63 K31 K32 L50
    Date: 2015–12–28
  10. By: Hartog, Joop (University of Amsterdam); Raposo, Pedro (Universidade Catolica Portuguesa, Lisbon)
    Abstract: In the model of Harris and Holmstrom (1982) workers pay an insurance premium to prevent a wage decline. As employers are unable to assess the ability of a labour market entrant, they would offer a wage equal to expected productivity of the worker's category and adjust it with unfolding information on true individual productivity. Workers are willing to accept a reduction in starting wage to prevent a reduction in their wage when their productivity is revealed to be below the expected value for their category. While Harris and Holmstrom indicate crystal clear how the prediction can be tested, their prescription has never been applied. Using Portuguese data covering virtually the entire labour force, we find that the prediction is unequivocally rejected. We interpret the results instead as confirmation of earlier results showing that workers are compensated for the financial risk of investing in an education.
    Keywords: risk premium, starting wages, unknown productivity, wage rigidity
    JEL: J31 D86
    Date: 2015–12
  11. By: Guner, Nezih; Parkhomenko, Andrii; Ventura, Gustavo
    Abstract: We document that for a group of high-income countries (i) mean earnings of managers tend to grow faster than for non managers over the life cycle; (ii) the earnings growth of managers relative to non managers over the life cycle is positively correlated with output per worker. We interpret this evidence through the lens of an equilibrium life-cycle, span-of-control model where managers invest in their skills. We parameterize this model with U.S. observations on managerial earnings, the size-distribution of plants and macroeconomic aggregates. We then quantify the relative importance of exogenous productivity differences, and the size-dependent distortions emphasized in the misallocation literature. Our findings indicate that such distortions are critical to generate the observed differences in the growth of relative managerial earnings across countries. Thus, observations on the relative earnings growth of managers become natural targets to discipline the level of distortions. Distortions that halve the growth of relative managerial earnings (a move from the U.S. to Italy in our data), lead to a reduction in managerial quality of 27% and to a reduction in output of about 7% – more than half of the observed gap between the U.S. and Italy. We find that crosscountry variation in distortions accounts for about 42% of the cross-country variation in output per worker gap with the U.S.
    Keywords: distortions; management practices; managers; productivity differences; size; skill investments
    JEL: E23 E24 J24 M11 O43 O47
    Date: 2015–12

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