nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2016‒02‒29
thirteen papers chosen by
Patrick Kampkötter
Universität zu Köln

  1. Bonus versus Penalty: How Robust Are the Effects of Contract Framing? By Jonathan de Quidt; Francesco Fallucchi; Felix Koelle; Daniele Nosenzo; Simone Quercia
  2. The retention effect of training: Portability, visibility, and credibility By Dietz, Daniel; Zwick, Thomas
  3. The Effect of Announced Downsizing on Workplace Performance: Evidence from a Retail Chain By Friebel, Guido; Heinz, Matthias; Zubanov, Nikolay
  4. Contracting with Feedback By Lin, Tse-chun; Liu, Qi; Sun, Bo
  5. Does Worker Wellbeing Affect Workplace Performance? By Alex Bryson; John Forth; Lucy Stokes
  6. Mobile information and communication technologies, flexible work organization and labor productivity: Firm-level evidence By Viete, Steffen; Erdsiek, Daniel
  7. Deception and Self-Deception By Peter Schwardman; Joël van der Weele
  8. Ingratiation and Favoritism in Organizations By Agnieszka Rusinowska; Vassili Vergopoulos
  9. Human Capital Quality and Aggregate Income Differences: Development Accounting for U.S. States By Eric A. Hanushek; Jens Ruhose; Ludger Woessmann
  10. Gender Gaps in Japan and Korea: A comparative study on the rates of promotions to managing positions By YOUM Yoosik; YAMAGUCHI Kazuo
  11. Business Practices in Small Firms in Developing Countries By McKenzie, David; Woodruff , Christopher
  12. Opening up opportunities: education reforms in Poland By Maciej Jakubowski
  13. Taxing Capital? The Importance of How Human Capital is Accumulated By Peterman, William B.

  1. By: Jonathan de Quidt (Institute for International Economic Studies, Stockholm University); Francesco Fallucchi (School of Economics, University of East Anglia); Felix Koelle (Center for Social and Economic Behavior, University of Cologne); Daniele Nosenzo (School of Economics, University of Nottingham); Simone Quercia (Institute for Applied Microeconomics, University of Bonn)
    Abstract: We study the relative effectiveness of contracts that are framed either in terms of bonuses or penalties. In one set of treatments subjects know at the time of effort provision whether they have achieved the bonus / avoided the penalty. In another set of treatments subjects only learn the success of their performance at the end of the task. We fail to observe a contract framing effect in either condition: effort provision is statistically indistinguishable under bonus and penalty contracts. We discuss possible reasons for this null result.
    Keywords: contract framing; bonus; penalty; fine; loss aversion
    Date: 2016–01
  2. By: Dietz, Daniel; Zwick, Thomas
    Abstract: This paper analyses the effect of training participation on employees' retention in the training company. It for the first time empirically combines the human capital and the monopsony theory by jointly controlling for the portability, visibility, and credibility of training. Based on an extensive German linked-employer-employee data set with detailed information on training history (WeLL-ADIAB), we show that training increases employees' retention. We compare the probability to stay at the same employer between training participants and accidental training non-participants (those who could not participate in planned training on the basis of exogeneous reasons). Higher portability of general human capital contents and visibility of training induced by training certificates however reduce the retention effect of training. Retention is further reduced when training is credibly provided and certified by external institutions, the full training effect on retention is still positive, however. We are careful to control for endogeneity of training participation in retention equations, unobserved time-invariant effects, and extensive individual and employer characteristics including wage increases and general job satisfaction.
    Keywords: Labor Mobility,Turnover,Employment,Training
    JEL: J62 J63 M51 M53
    Date: 2016
  3. By: Friebel, Guido (Goethe University Frankfurt); Heinz, Matthias (University of Cologne); Zubanov, Nikolay (Goethe University Frankfurt)
    Abstract: We estimate the effect of downsizing announcement on workplace performance using data from a German bakery chain of 193 shops. Faced with intensified competition, the firm decided to sell or close down 57 of its worst performing shops. We identify the effect of downsizing from a plausibly exogenous variation in the timing of the sale or closure announcement in the individual shops. We find that the announcements of the shop being sold to a new owner and being closed down reduce sales by six and 21 percent, respectively. The negative effect of downsizing increases with the share of workers with a permanent contract, even though permanent workers faced a much lower unemployment risk. We relate our findings to the literatures on downsizing and psychological contract.
    Keywords: downsizing, psychological contract, retail, teams, statistical analysis
    JEL: M12 M54
    Date: 2016–02
  4. By: Lin, Tse-chun (University of Hong Kong); Liu, Qi (Peking University); Sun, Bo (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: We study the effect of financial market conditions on managerial compensation structure. First, we analyze the optimal pay-for-performance in a model in which corporate decisions and firm value are both endogenous to trading due to feedback from information contained in stock prices. In a less frictional financial market, the improved information content of stock prices helps guide managerial decisions, and this information substitutes out part of the direct incentive provision from compensation contracts. Thus, the optimal pay-for-performance is lowered in response to reductions in market frictions. Second, we test our theory using two quasi-natural experiments and find evidence that is consistent with the theory. Our results indicate that the financial market environment plays an important role in shaping CEO compensation structure.
    Keywords: Feedback effect; CEO compensation; Transaction costs; Reg-SHO Pilot program; Decimalization
    JEL: G30 J33
    Date: 2015–08–13
  5. By: Alex Bryson; John Forth; Lucy Stokes
    Abstract: This paper uses linked employer-employee data to investigate the relationship between employees’ subjective well-being and workplace performance in Britain. The analyses show a clear, positive and statistically-significant relationship between the average level of job satisfaction at the workplace and workplace performance. This finding is present in both cross-sectional and panel analyses and is robust to various estimation methods and model specifications. In contrast, we find no association between levels of job-related affect and workplace performance.
    Date: 2015–05
  6. By: Viete, Steffen; Erdsiek, Daniel
    Abstract: Mobile information and communication technologies (ICT) have started to diffuse rapidly in the business sector. This study tests for the complementarity between the use of mobile ICT and organizational practices providing workplace flexibility. We hypothesize that mobile ICT can create value if organizational practices grant employees more autonomy over when, where and how to perform work-related tasks. Our data set comprises 1132 German service firms and provides information on the share of employees that have been equipped with mobile devices which allow for wireless internet access, such as notebooks, tablets and smartphones. Workplace flexibility is measured in terms of firms' use of working from home arrangements, working time accounts, and trust-based working time. Within a production function framework, we find that the use of mobile ICT is associated with a productivity premium only in firms granting workplace flexibility by means of trust-based working time. Robustness checks suggest that our results are not driven by ICT-skill complementarity or by complementarity of mobile ICT with multiple alternative modern management practices.
    Keywords: Mobile Information and Communication Technologies,Organizational Practices,Labor Productivity,Complementarity,Firm-Level Data
    JEL: D22 L22 M10 O33
    Date: 2015
  7. By: Peter Schwardman (Ludwig Maximilian University of Munich, Germany); Joël van der Weele (University of Amsterdam)
    Abstract: We experimentally investigate the determinants of overconfidence and test the hypothesis, advanced by Robert Trivers, that overconfidence serves to more effectively persuade or deceive others. After performing a cognitively challenging task, half of our subjects are informed about the possibility of earning money by convincing others of their high relative performance in a structured face-to-face interaction. Privately elicited beliefs show that informed participants are 50% more overconfident than those in a control condition, and are less responsive to objective feedback on their performance. Using random variation in confidence generated by our feedback mechanism, we find that increased confidence indeed causes higher evaluations in the ensuing interactions, unless the evaluators have been explicitly instructed to watch out for lies. These results support the idea that confidence is a strategic variable in human interaction.
    Keywords: Overconfidence; belief formation; self-deception; deception
    JEL: C91 D03 D83
    Date: 2016–02–19
  8. By: Agnieszka Rusinowska (Paris School of Economics - Centre d'Economie de la Sorbonne); Vassili Vergopoulos (Paris School of Economics - Centre d'Economie de la Sorbonne)
    Abstract: We combine in the same theoretical framework two related phenomena that can be present in organizations – ingratiation of subordinates and favoritism of superiors towards some of their employees. There are three actors in the model: a worker, a manager supervising the worker, and a firm that employs the worker and the manager. Ingratiation is defined as a strategic behavior of the worker to make himself more attractive to the manager. In our model ingratiation is expressed by opinion conformity which is exerted by the worker when reporting his opinion to the manager. Favoritism of the manager is based on using a bias when reporting to the firm her observation of the worker's performance. First, we determine to optimal level of the effort and the reported opinion of the worker, and the level of bias of the manager. Then, we ingestigate the effects of favoritism and ingratiation on the expected wages and utilities of the worker and the manager, and on the expected profit of the firm
    Keywords: ingratiation; opinion conformity; favoritism; organization; performance; wage; profit
    JEL: D8 D2 L2 C65
    Date: 2016–01
  9. By: Eric A. Hanushek; Jens Ruhose; Ludger Woessmann
    Abstract: Although many U.S. state policies presume that human capital is important for state economic development, there is little research linking better education to state incomes. In a complement to international studies of income differences, we investigate the extent to which quality-adjusted measures of human capital can explain within-country income differences. We develop detailed measures of state human capital based on school attainment from census micro data and on cognitive skills from state- and country-of-origin achievement tests. Partitioning current state workforces into state locals, interstate migrants, and immigrants, we adjust achievement scores for selective migration. We use the new human capital measures in development accounting analyses calibrated with standard production parameters. We find that differences in human capital account for 20-35 percent of the current variation in per-capita GDP among states, with roughly even contributions by school attainment and cognitive skills. Similar results emerge from growth accounting analyses.
    JEL: I25 J24
    Date: 2015–06
  10. By: YOUM Yoosik; YAMAGUCHI Kazuo
    Abstract: Both Korea and Japan are countries that are well known for showing a strong persistence of their traditional gender role attitudes and behaviors. Thus, we have observed very large gender gaps in wage and economic statuses in both countries. For example, as of 2010, the proportion of women in management ranks was only about 10% for both Korea and Japan while it ranged from 43% for the United States to 30% for Germany. We used RIETI's Survey for Japan and Occupational Wage Survey (OWS) in 2009 for Korea that had been operated by Korea's Ministry of Labor from 1990 to 2013 as multiple cross-sectional data. For decomposition purposes, we adopted the DiNardo-Fortin-Lemieux (DFL) method to examine the disparity in the promotion rates (Yamaguchi 2011; 2014; 2015). We decomposed the disparity in promotions into two parts: one that can be explained by human capital including age, educational level, and employment duration; and another part that cannot be explained by human capital. In 2009, the unexplained portion in Japan was 70% for kakaricho (task group heads) and 79% for kacho (section heads). The closest year for comparison purposes available in OWS for Korea was 2004, and the unexplained portions were 62% and 67% for kakaricho and kacho, respectively. Based on this, we deduce that the glass ceiling, which is invisible above human capital, was possibly more serious in Japan compared to Korea. However, the result from 1990-2013 OWS revealed that the unexplained disparity portion in promotions to managers (kakaricho and higher) in Korea has increased since 2004, from 72% to 84%, and it might be possible that the magnitude of the glass ceiling is quite similar in the two countries. Further studies need more comparable data to draw stronger conclusions.
    Date: 2016–02
  11. By: McKenzie, David (World Bank); Woodruff , Christopher (Department of Economics, University of Warwick)
    Abstract: Management has a large effect on the productivity of large firms. But does management matter in micro and small firms, where the majority of the labor force in developing countries works? We develop 26 questions that measure business practices in marketing, stock-keeping, recordkeeping, and financial planning. These questions have been administered in surveys in Bangladesh, Chile, Ghana, Kenya, Mexico, Nigeria and Sri Lanka. We show that variation in business practices explains as much of the variation in outcomes – sales, profits and labor productivity and TFP – in microenterprises as in larger enterprises. Panel data from three countries indicate that better business practices predict higher survival rates and faster sales growth. The association of business practices with firm outcomes is robust to including numerous measures of the owner’s human capital. We find that owners with higher human capital, children of entrepreneurs, and firms with employees employ better business practices.
    Keywords: business practices; small enterprises; productivity; management
    JEL: O12 L26 M20 O17 M53
    Date: 2016
  12. By: Maciej Jakubowski
    Abstract: Poland is one of the few European countries that achieved strong improvement of student performance over the last decade. According to the OECD PISA results Poland moved from below to above the OECD average and now is close to top-performing countries. The score improvements are a consequence of Polish education system reform introduced in 1999. The most important change of the 1999 reform was an extension of comprehensive education by one year. The evidence suggests the change immediately benefited student, while the remaining elements of the reform are probably responsible for the gradual improvement. The differences between secondary schools were largely limited. Introduction of nation-wide comparable exams, conducted at the end of every stage of education, played a crucial role in assuring quality in education system. Poland also increased support for the preschool education and further expanded the general curriculum in vocational schools. The result of all reforms was the expansion of obligatory comprehensive education from 8 years to at least 10 years now.
    Keywords: education reform, student performance, Poland
    JEL: I21 I28 J24
    Date: 2015–01
  13. By: Peterman, William B. (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: This paper considers the impact of how human capital is accumulated on optimal capital tax policy in a life cycle model. In particular, it compares the optimal capital tax when human capital is accumulated exogenously, endogenously through learning-by-doing, and endogenously through learning-or-doing. Previous work demonstrates that in a simple two generation life cycle model with exogenous human capital accumulation, if the utility function is separable and homothetic in each consumption and labor, then the government has no motive to condition taxes on age or tax capital. In contrast, this paper demonstrates analytically that adding either form of endogenous human capital accumulation creates a motive for the government to use age-dependent labor income taxes. Moreover, if the government cannot condition taxes on age, then a capital tax can be optimal in order to mimic such taxes. This paper quantitatively explores the strength of this channel and finds that, including human capital accumulation with learning-by-doing, as opposed to exogenously, causes the optimal capital tax to increase by between 7.3 and 14.5 percentage points. In contrast, introducing learning-or-doing causes a much smaller increase in the optimal capital tax of between 0.7 and 3.7 percentage points. Taken as a whole, this paper finds that the specific formulation by which human capital is accumulated can have notable implications on the optimal capital tax.
    Keywords: Optimal Taxation; Capital Taxation; Human Capital
    JEL: E24 E62 H21
    Date: 2015–12–29

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