nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2016‒02‒17
24 papers chosen by
Patrick Kampkötter
Universität zu Köln

  1. Optimal Allocation of Decision-Making Authority and the Provision of Incentives under Uncertainty By Schöttner, Anja; Rohlfing-Bastian, Anna
  2. Performance Pay, Sorting and Employers Choice: By Hoffmann, Timo
  3. Big Fishes in Small Ponds: Ability Rank and Human Capital Investment By Elsner, Benjamin; Isphording, Ingo
  4. Unfair Incentives: A Behavioral Note on Sharecropping By Schumacher, Heiner; Kemper, Niels
  5. The Gender Wage Gap: Extent, Trends, and Explanations By Blau, Francine D.; Kahn, Lawrence M.
  6. The Role of Corporate Culture in the Financial Industry By Barth, Andreas
  7. Do agents care for the mission of their job? A field experiment By Mertins, Vanessa; Jeworrek, Sabrina
  8. A Principal-Agent Model of Competition Law Compliance By Herold, Daniel
  9. Sickness absence, presenteeism and work-related characteristics By Arnold, Daniel Timo; de Pinto, Marco
  10. Seniority Rules, Worker Mobility and Wages: Evidence from Multi-Country Linked Employer-Employee Data By Böckerman, Petri; Skedinger, Per; Uusitalo, Roope
  11. Peer Effects in Cheating on Task Performance By Mechtel, Mario; Bäker, Agnes
  12. Surprising Gifts: Theory and Laboratory Evidence By Werner, Peter; Khalmetski, Kiryl; Ockenfels, Axel
  13. The Pros and Cons of Sick Pay Schemes: A Method to Test for Contagious Presenteeism and Shirking Behavior By Pichler, Stefan; Ziebarth, Nicolas R.
  14. The Impact of Education on Personality - Evidence from a German High School Reform By Anger, Silke; Dahmann, Sarah
  15. When Does HRM 'Work' in Small British Enterprises? By White, Michael; Bryson, Alex
  16. Not Working at Work: Loafing, Unemployment and Labor Productivity By Burda, Michael Christopher; Genadek, Katie; Hamermesh, Daniel
  17. Optimal Effort Incentives in Dynamic Tournaments By Schmutzler, Armin; Klein, Arnd
  18. Crowding Out in the Labour Market: Do Employers Lend a Hand? By Verhaest, Dieter; Bogaert, Elene; Dereymaeker, Jeroen; Mestdagh, Laura; Baert, Stijn
  19. Contracting with Researchers By Verbeck, Matthias
  20. Team Production, Gender Diversity, and Male Courtship Behavior By von Siemens, Ferdinand Alexander
  21. Prevalence and Determinants of Choice Bracketing - Experimental Evidence By Stracke, Rudi; Kerschbamer, Rudolf; Sunde, Uwe
  22. Missing at Work - Sickness-related Absence and Subsequent Job Mobility By Chadi, Adrian; Goerke, Laszlo
  23. Commuting and Sickness Absence By Lorenz, Olga; Goerke, Laszlo
  24. Communicating Subjective Evaluations By Lang, Matthias

  1. By: Schöttner, Anja; Rohlfing-Bastian, Anna
    Abstract: Incentives for managers are often provided by offering them performance-based compensation schemes. The efficiency of such monetary compensations, however, depends on several factors, among them the quality of the employed performance measures, the information available for contracting purposes, and the allocation of decision-making authority which translates into either more centralized or more decentralized organizational structures. This article investigates a firm's decision whether to delegate or retain the authority to decide on a specific job design in a moral hazard environment with asymmetric information on effort costs. It provides conditions under which decentralization is the preferred organizational form. Moreover, it derives the result that the relation between incentives and the delegation of decision-making authority is not univocal, but depends on the quality of the employed performance measure. In this regard, it contributes to explaining the mixed empirical evidence on the relation between incentives and decision-rights.
    JEL: M52 M55 M21
    Date: 2015
  2. By: Hoffmann, Timo
    Abstract: In this paper I analyze the attractiveness of a rank-order tournament if both market sides, employers and workers, can choose between several payment systems. I consider the self-selection of workers into different payment schemes, their effort provisions and the payment system choices of managers in a real effort laboratory experiment. Depending on the stage of the experiment, workers are either randomly tied to a manager or are sorted into the available payment schemes (a fixed wage, a piece-rate or a rank-order tournament) according to their preferences. When managers decide over the payment systems a cheap (low prize) tournament yields larger profits for the managers than a piece-rate contract. This is not the case for high prize tournaments. Furthermore, with worker choices I find a clear self-selection pattern: More productive workers self-selected into the variable payment schemes (piece-rate and tournament) and most workers prefer the safer option piece-rate to the tournament. Especially the low prize tournament is not chosen by many productive workers. As a consequence, even the low prize tournament does not yield larger profits than the piece-rate contract to managers. These findings show that in conditions in which a piece-rate payment is possible, rank-order tournaments are not simultaneously attractive for workers and employers.
    JEL: C91 J31 D81
    Date: 2015
  3. By: Elsner, Benjamin; Isphording, Ingo
    Abstract: We study the impact of a student's ordinal rank in a high-school cohort on educational attainment several years later. To identify a causal effect, we compare multiple cohorts within the same school, exploiting exogenous variation in cohort composition. We nd that a student's ordinal rank in high-school signi cantly affects educational outcomes later in life. If two students with the same ability have a different rank in their respective cohort, the student with the higher rank is signi cantly more likely to nish high-school, to attend college, and to complete a 4-year college degree. These results suggest that students under- invest in their human capital if they have a low rank within their cohort even though they have a high ability compared to most students of the same age. Exploring potential channels, we nd that students with a higher rank have higher expectations about their future career, and feel that they are being treated more fairly by their teachers.
    JEL: I23 I21 J24
    Date: 2015
  4. By: Schumacher, Heiner; Kemper, Niels
    Abstract: We conducted a field experiment with real-life tenants in Ethiopia to test the incentive effects of fixed-wage, sharecropping, fixed-rent, and ownership contracts. The experimental task resembles a common process in agricultural production. The sharecropping contract is essentially a piece-rate scheme framed as a profit sharing agreement. The sharecropping output was about 11 percent smaller than the fixed-rent output. Surprisingly, it is statistically indistinguishable from the fixed-wage output, despite substantial piece rates. This effect is driven by real-life sharecroppers. Their sharecropping output was significantly smaller than that of non-sharecroppers, and in one region, it was even 10 percent lower than sharecroppers fixed-wage output. Based on qualitative interviews and historical accounts, we argue that our subjects dislike sharecropping contracts because of the unfair profit sharing and the controversial allocation of the land. The contractual performance may therefore depend on the perceived fairness of the incentive scheme.
    JEL: C93 J30 N50
    Date: 2015
  5. By: Blau, Francine D. (Cornell University); Kahn, Lawrence M. (Cornell University)
    Abstract: Using PSID microdata over the 1980-2010, we provide new empirical evidence on the extent of and trends in the gender wage gap, which declined considerably over this period. By 2010, conventional human capital variables taken together explained little of the gender wage gap, while gender differences in occupation and industry continued to be important. Moreover, the gender pay gap declined much more slowly at the top of the wage distribution that at the middle or the bottom and by 2010 was noticeably higher at the top. We then survey the literature to identify what has been learned about the explanations for the gap. We conclude that many of the traditional explanations continue to have salience. Although human capital factors are now relatively unimportant in the aggregate, women's work force interruptions and shorter hours remain significant in high skilled occupations, possibly due to compensating differentials. Gender differences in occupations and industries, as well as differences in gender roles and the gender division of labor remain important, and research based on experimental evidence strongly suggests that discrimination cannot be discounted. Psychological attributes or noncognitive skills comprise one of the newer explanations for gender differences in outcomes. Our effort to assess the quantitative evidence on the importance of these factors suggests that they account for a small to moderate portion of the gender pay gap, considerably smaller than say occupation and industry effects, though they appear to modestly contribute to these differences.
    Keywords: gender, gender pay gap, wage differentials, discrimination, human capital investment, occupations, occupational segregation
    JEL: J16 J24 J31 J71
    Date: 2016–01
  6. By: Barth, Andreas
    Abstract: This paper analyzes the role of corporate culture in the financial industry. Theoretical literature emphasizes the role of corporate culture in the sorting process of workers into firms. We take this argument to the empirics and analyze whether banks that differ in their corporate culture use different compensation schemes in order to attract a specific type of workers. In a second step, we combine the role of corporate culture with the literature on CEO compensation and risk-taking and analyze empirically the impact of corporate culture on banks' risk-taking as well as on banks' performance. More precisely, we argue that the incentives arising from CEO compensation schemes are diluted once we control for the self-sorting mechanism of CEOs in firms with different corporate cultures. We find that CEOs of banks with a strong competition-oriented corporate culture have a larger share of variable payments in their total compensation. Moreover, we find that a more competition-oriented corporate culture is associated with a higher credit risk as well as with a higher buy-and-hold stock market return.
    JEL: G21 G34 M14
    Date: 2015
  7. By: Mertins, Vanessa; Jeworrek, Sabrina
    Abstract: Economic theory suggests that agents care for the outcomes they produce. This paper studies the conditions under which a pro-social mission of a job affects workers motivation to perform well. In particular, we investigate whether it makes a difference if workers actively decide upon doing a mission-oriented job or are exogenously assigned. We find that a pro-social mission itself affects only a small group of workers in a positive way whereas self-selection into a mission-oriented job leads to a highly significant overall performance boost.
    JEL: C93 J33 M55
    Date: 2015
  8. By: Herold, Daniel
    Abstract: This paper analyzes firm owners' incentives to implement Competition Law Compliance Programs as imperfect monitoring devices in a principal-agent setup and the interaction effects with bonus contracts. The manager chooses working effort and has the option to cartelize. The model reveals a non-monotonic relationship between profit targets and incentives to collude. Contrary to intuition, it might be the case that low instead of high profit targets facilitate collusion. This result is driven by the threat of detection and punishment. A Compliance Program deters the agent from misbehavior and enhances effort as long as the agent did not engage in collusive activity. Additionally, the owner can use the Program as an insurance against fines.
    JEL: D21 D82 D02
    Date: 2015
  9. By: Arnold, Daniel Timo; de Pinto, Marco
    Abstract: This paper investigates how changes in work-related factors affect workers' absence and presenteeism behavior. Previous studies (implicitly) assume that there is a substitutive relationship - specifically, that a change in a work-related factor that decreases the level of absence simultaneously increases presenteeism (or vice versa). We set up a theoretical model in which work-related characteristics not only affect a worker's absence decision but also the critical level of sickness that defines presenteeism. Our model shows that non-substitutive relationships between absence and presenteeism are also conceivable. Using European cross-sectional data, we find only one substitutive and few complementary relationships, while the bulk of the work-related characteristics are related only to one of the two sickness states.
    JEL: J22 I10 M50
    Date: 2015
  10. By: Böckerman, Petri (Turku School of Economics, Labour Institute for Economic Research, Helsinki a); Skedinger, Per (Research Institute of Industrial Economics (IFN)); Uusitalo, Roope (Jyväskylä University School of Business and Economics)
    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 J32 J63 K31 L51
    Date: 2016–01–08
  11. By: Mechtel, Mario; Bäker, Agnes
    Abstract: Recent research has shown that the presence of peers can increase individual output both in the lab and the field. As a new explanation for higher individual output levels, we test whether peer settings are particularly prone to cheating even if peer settings do not provide additional monetary benefits of cheating. Participants in our real effort experiment had the opportunity to cheat when declaring their output levels. Although cheating did not have different monetary consequences when working alone than when working in the presence of a peer, we find that cheating on task performance is a more severe problem in peer settings. Our results potentially have far-reaching repercussions regarding organizational design in the context of group settings where principals are not fully able to observe agents' output levels.
    JEL: M50 J20 D20
    Date: 2015
  12. By: Werner, Peter; Khalmetski, Kiryl; Ockenfels, Axel
    Abstract: People do not only feel guilt from not living up to others expectations (Battigalli and Dufwenberg (2007)), but may also like to exceed them. We propose a model that generalizes the guilt aversion model to capture the possibility of positive surprises when making gifts. A model extension allows decision makers to care about others' attribution of intentions behind surprises. We test the model in two dictator game experiments. Experiment 1 shows a strong causal effect of recipients expectations on dictators transfers. Moreover, in line with our model, the correlation between transfers and expectations can be both, positive and negative, obscuring the effect in the aggregate. Experiment 2 shows that dictators care about what recipients know about the intentions behind surprises.
    JEL: C91 D64 D84
    Date: 2015
  13. By: Pichler, Stefan; Ziebarth, Nicolas R.
    Abstract: This paper proposes a test for the existence and the degree of contagious presenteeism and negative externalities in sickness insurance schemes. First, we theoretically decompose moral hazard into shirking and contagious presenteeism behavior. Then we derive testable conditions for reduced shirking, increased presenteeism, and the level of overall moral hazard when benefits are cut. We implement the test empirically exploiting German sick pay reforms and administrative industry-level data on certified sick leave by diagnoses. The labor supply adjustment for contagious diseases is significantly smaller than for non-contagious diseases, providing evidence for contagious presenteeism and negative externalities which arise in form of infections.
    JEL: I12 J22 J32
    Date: 2015
  14. By: Anger, Silke; Dahmann, Sarah
    Abstract: Western labor markets face major challenges caused by demographic changes. They increasingly experience a shortage of skilled workers and face the problem of an increasing disparity between a reduced group of active workers contributing to the pension scheme and a rising share of an older population receiving pension benefits. Starting in 2001, Germany therefore introduced an educational reform enabling high school graduates earlier labor market entry. By shortening the length of upper secondary school leaving the overall curriculum unchanged, the reform did not only make German graduates more competitive on the international labor market and reduce costs in the German education system, but also increased the labor force by one birth cohort, relieving the shortage of skilled workers and disburdening the pension scheme. However, the reform may have led to unintended consequences on individuals' human capital. This paper investigates this reform's short-term effects on students' personality exploiting the variation in high school duration over time and across states as a quasi-natural experiment. Using rich data from the German Socio-Economic Panel (SOEP) study on adolescents' Big Five personality traits and on their locus of control, our estimates show that shortening high school caused students on average to be less emotionally stable. Moreover, the personality of male students and students from disrupted families changed more strongly following the reform: they became more agreeable and more extroverted, respectively. We conclude that the educational system plays a role in shaping adolescents' personality, which in turn impacts labor market success and further later life outcomes.
    JEL: I21 I28 J24
    Date: 2015
  15. By: White, Michael (Policy Studies Institute); Bryson, Alex (University College London)
    Abstract: Using nationally representative workplace data we find substantial use of high-performance work systems (HPWS) in Britain's small enterprises. We find empirical support for the proposition that HPWS have a non-linear association with employees' overall job attitude, with a positive association apparent where HPWS are used intensively. These associations are robust to factors often cited as obstacles to HPWS implementation such as informality and family ownership.
    Keywords: human resource management, high-performance work system, small firms, organisational commitment, job satisfaction
    JEL: J28 M50 M54
    Date: 2016–01
  16. By: Burda, Michael Christopher; Genadek, Katie; Hamermesh, Daniel
    Abstract: Using the American Time Use Survey (ATUS) 2003-12, we estimate time spent by workers in non-work while on the job. Non-work time is substantial and co-varies positively with the local unemployment rate. While the fraction of workers who spend some time in non-work varies pro-cyclically, the average time spent by workers in non-work conditional on any positive non-work varies countercyclically. These results are consistent with a model in which heterogeneous workers are paid efficiency wages to refrain from loafing on the job. That model also predicts relationships of the incidence and conditional amounts of non-work with wage rates and unemployment benefits that are observed in links of the ATUS to data characterizing states unemployment insurance schemes.
    JEL: J22 E24 J30
    Date: 2015
  17. By: Schmutzler, Armin; Klein, Arnd
    Abstract: This paper analyzes two-stage rank-order tournaments. A principal decides (i) how to spread prize money across the two periods, (ii) how to weigh performance in the two periods when awarding the second-period prize, and (iii) whether to reveal performance after the rst period. The information revelation policy depends exclusively on properties of the e ort cost function. The principal always puts a positive weight on rst-period performance in the second period. The size of the weight and the optimal prizes depend on properties of the observation error distribution; they should be chosen so as to strike a balance between the competitiveness of rst- and second-period tour- naments. In particular, the principal sets no rst-period prize unless the observations in period one are considerably more precise than in period two
    JEL: D02 D86 D21
    Date: 2015
  18. By: Verhaest, Dieter (KU Leuven); Bogaert, Elene (Ghent University); Dereymaeker, Jeroen (KU Leuven); Mestdagh, Laura (KU Leuven); Baert, Stijn (Ghent University)
    Abstract: We test the basic assumption underlying the job competition and crowding out hypothesis: that employers always prefer higher educated to lower educated individuals. To this end, we conduct a randomised field experiment in which duos of fictitious applications by bachelor and master graduates are sent to real vacancies requiring only a bachelor degree. Our design allows to look at whether employers' preferences for overqualified versus adequately qualified applicants depend on the demand and supply context, sectoral activity and type of organisation, and characteristics of the posted vacancy. For the overall sample, we find that master graduates are 19% more likely to be directly invited for a job interview. Nonetheless, we conclude that eventual crowding out of bachelor graduates as a consequence of this selection policy is unlikely to be large since the advantage for master graduates is particularly observed for jobs with high overall invitation rates.
    Keywords: job competition, recruitment, hiring, youth labour market, mismatch, underemployment, overqualification, field experiments
    JEL: I21 J24 M51
    Date: 2016–01
  19. By: Verbeck, Matthias
    Abstract: We study a setting in which one or two agents conduct research on behalf of a principal. The agents binary performance level (suc- cess or failure) depends on their invested research e ort, and their choice of a research technology that is uncertain in respect of its apt- ness to generate a success. While in the single-agent-setting the agent has no incentive to deviate from the principal s preferred technology choice, this is not generally true for the multiagent-setting. When technologies are mutually exclusive - only one of them will be suit- able for yielding a high output - we show that there exists a contract that aligns the principal s and the agents interests. However, under the plausible assumption of scientists free technology choice, our re- sults suggest that there is a bias towards mainstream-research: Agents choose promising technologies more often than socially optimal.
    JEL: D82 D86 D83
    Date: 2015
  20. By: von Siemens, Ferdinand Alexander
    Abstract: This theoretical paper explores the impact of gender diversity on team production. The key assumption is that men derive utility from signaling high ability to female colleagues. The analysis shows that some gender diversity maximizes expected team production if (i) men and women have similar expected ability, and (ii) monetary incentives to exert effort are not too strong. The study generates important and testable economic implications: the presence of women fundamentally changes the behavior of male team members, gender diversity has the biggest effects in young teams, and monetary incentives crowd-out the impact of gender diversity.
    JEL: D03 D23 D82
    Date: 2015
  21. By: Stracke, Rudi; Kerschbamer, Rudolf; Sunde, Uwe
    Abstract: This paper investigates whether the timing of rewards affects behavior in multi-stage contests. Abstracting from discounting, theory predicts that it is irrelevant for behavior whether agents are immediately rewarded for succeeding on a particular stage, or whether the reward is delayed until the interaction on the subsequent stage is decided. When testing this prediction using a two-stage contest in lab experiments, we fnd that stage-2 efforts are identical in immediate and delayed reward treatments, while stage-1 effort is significantly lower if rewards are immediate. This difference can be explained by the salience of continuation values, which is strongly affected by the timing of rewards.
    JEL: C72 M52 J33
    Date: 2015
  22. By: Chadi, Adrian; Goerke, Laszlo
    Abstract: Economists often interpret absenteeism as an indicator of effort. Using data from the German Socio-Economic Panel (SOEP) study, this paper offers a comprehensive discussion of this view by analysing various forms of job mobility. The evidence reveals a significantly negative (positive) link between sickness-related absence and the probability of a subsequent promotion (dismissal). In line with the interpretation of absenteeism as a proxy for effort, instrumental variable analyses suggest no causal impact of absence behaviour on the likelihood of such career events when variation in illness-related absence is triggered exogenously. We observe no consistent gender differences in the link between absence and subsequent career events.
    JEL: J22 J63 M51
    Date: 2015
  23. By: Lorenz, Olga; Goerke, Laszlo
    Abstract: Commuting is an important and growing component of workers daily life and demands a lot of time. Given the importance of commuting, it is crucial to understand its consequences for different aspects of individual labour supply. In this paper, we focus on the causal effect of commuting on sickness absence from work using German panel data. According to theory, the effect of commuting on the number of workers absence days may be positive or negative. Empirical tests of this effect are not standard, due to reverse causation and lack of good control variables. To address reverse causation, estimates of commuting on absenteeism are derived using changes in commuting distance for workers who stay at the same workplace and who have the same residence during the period of observation. Keeping the workers employer and residence constant allows us to address endogeneity of commuting distance. Our results show that employees, who commute long distances (more than 50 kilometres), are absent more often than comparable employees with shorter commutes.
    JEL: I10 J22 R40
    Date: 2015
  24. By: Lang, Matthias
    Abstract: Should principals explain and justify their evaluations? Suppose the principal s evaluation is private information, but she can provide justification by sending a costly unverifiable message. If she does not provide justification, her message space is restricted, but the message is costless. I show that the principal justifies her evaluation to the agent if the evaluation indicates bad performance. The justification assures the agent that the principal has not distorted the evaluation downwards. In equilibrium, the wage increases in the agent s performance, when the principal justifies her evaluation. For good performance, however, the principal pays a constant high wage without justification.
    JEL: D82 D86 M52
    Date: 2015

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