nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2016‒04‒09
nine papers chosen by
Patrick Kampkötter
Universität zu Köln

  1. First-place loving and last-place loathing: How rank in the distribution of performance affects effort provision By David Gill; Victoria Prowse; Zdenka Kissova; Jaesun Lee
  2. How Do Agents React to Dynamic Wage Increases? An Experimental Study By Sliwka, Dirk; Werner, Peter
  3. High involvement management practices, technology uses, work motivation and job search behaviour By MARTIN Ludivine
  4. Money, Social Capital and Materialism. Evidence from Happiness Data By Marcin Piekalkiewicz
  5. Human Capital Sorting - the ‘when’ and ‘who’ of sorting of talents to urban regions By Ahlin, Lina; Andersson, Martin; Thulin, Per
  6. Managerial Compensation under Privately-Observed Hedging By Sun, Bo; Liu, Qi
  7. The Distribution of Talent across Contests Feedback in Higher Education By Ghazala Azmat; Marc Möller
  8. What You Don't Know... Can't Hurt You? A Field Experiment on Relative Performance Feedback in Higher Education By Azmat, Ghazala; Bagues, Manuel F.; Cabrales, Antonio; Iriberri, Nagore
  9. The Linked Employer-Employee Study of the Socio-Economic Panel (SOEP-LEE): Project Report By Michael Weinhardt; Alexia Meyermann; Stefan Liebig; Jürgen Schupp

  1. By: David Gill; Victoria Prowse; Zdenka Kissova; Jaesun Lee
    Abstract: Rank-order relative-performance evaluation, in which pay, promotion and symbolic awards depend on the rank of workers in the distribution of performance, is ubiquitous. Whenever firms use rank-order relative-performance evaluation, workers receive feedback about their rank. Using a real-effort experiment, we aim to discover whether workers respond to the specific rank that they achieve. In particular, we leverage random variation in the allocation of rank among subjects who exerted the same effort to obtain a causal estimate of the rank response function that describes how effort provision responds to the content of rank-order feedback. We find that the rank response function is U-shaped. Subjects exhibit 'first-place loving' and 'last-place loathing', that is subjects work hardest after being ranked first or last. We discuss implications of our findings for the optimal design of firms' performance feedback policies, workplace organizational structures and incentives schemes.
    Keywords: Relative performance evaluation, Relative performance feedback, Rank order feedback, Dynamic effort provision, Real effort experiment, Flat wage, Fixed wage, Taste for rank, Status seeking,Social esteem, Self esteem, Public feedback, Private feedback.
    JEL: C23 C91 J22 M12
    Date: 2016–03–03
  2. By: Sliwka, Dirk (University of Cologne); Werner, Peter (University of Cologne)
    Abstract: We investigate how workers' performance is affected by the timing of wages in a real-effort experiment. In all treatments agents earn the same wage sum but wage increases are distributed differently over time. We find that agents work harder under increasing wage profiles if they do not know these profiles in advance. A profile that continuously increases wages by small amounts raises performance by about 15% relative to a constant wage. The effort reactions can be organized by a model in which agents reciprocally respond to wage impulses, comparing wages to an adaptive reference standard determined by the previous wage.
    Keywords: wage, reciprocity, reference point
    JEL: M12 C91
    Date: 2016–03
  3. By: MARTIN Ludivine
    Abstract: Nowadays, employers face the mobility of the most productive employees and large costs induced by labour turnover. This paper examines the impact of two management policies on employees’ motivation on one hand and their quitting behaviour on the other hand. These two policies are i) the participation in High Involvement Management (HIM) practices and ii) the use of Information and Communication Technologies (ICT). Employees’ motivation, which is at the heart of this question, has different facets. Some employees exert effort because their job is in line with their values, gives opportunities for personal growth and pleasure in performing tasks. Alternatively, employees may simply be driven by rewards or compulsion. Using recent survey-based data of employees, the results show that the HIM and ICT strategies are positively related to the two types of work motivation (personal growth and rewards/compulsion). However, these strategies affect differently the likelihood of staff to remain or leave their current employer by type of motivation. While the HIM strategy reduces the risk that employees motivated by personal growth search for another job, it encourages on the contrary those who are motivated by rewards or compulsion to leave. ICT appear to play no role in employee retention.
    Keywords: on-the-job search; work motivation; high involvement management practices; information and communication technologies
    JEL: J28 J81 M54
    Date: 2016–03
  4. By: Marcin Piekalkiewicz
    Abstract: Are unhappiness, high concern for money and scarcity of social capital different faces of the same phenomenon? Economists tend to treat these variables as distinct correlates of well-being. On the contrary, positive psychologists argue that they all relate to materialism, a system of personal values ascribing great importance in life to extrinsic motivations and low priority to intrinsic motivations. Using data from two European cross-sectional surveys and the German Socio-Economic Panel, I test the hypothesis that material interests, proxied by the effects of individual and reference income on well-being, are associated with low levels of social capital. The results suggest that people with scarce social capital tend to have greater material interests, whereas the negative effect of income comparisons on well-being is eliminated for individuals exhibiting the highest levels of social capital. The implication of such finding is that promoting social capital reduces people's material concerns and has positive impact on their well-being. The results from a country-level analysis additionally show that, since social capital moderates the importance of income for well-being on individual level, the well-being gap between income groups is significantly smaller in countries with higher social capital.
    Keywords: subjective well-being, life satisfaction, social capital, materialism, relative income, social comparisons, happiness inequality
    JEL: D31 I31 Z13
    Date: 2016–03
  5. By: Ahlin, Lina (CIRCLE & Department of Economics, Lund University); Andersson, Martin (Department of Industrial Economics, Blekinge Institute of Technology (BTH), Karlskrona & CIRCLE, Lund University); Thulin, Per (Department of Industrial Economics and Management, KTH Royal Institute of Technology, Stockholm & Swedish Entrepreneurship Forum, Stockholm)
    Abstract: Sorting of high-ability workers is a main source of urban-rural disparities in economic outcomes. Less is known about when such human capital sorting occurs and who it involves. Using data on 15 cohorts of university graduates in Sweden, we demonstrate significant sorting to urban regions on high school grades and education levels of parents, i.e. two attributes typically associated with latent abilities that are valued in the labor market. A large part of this sorting occurs already in the decision of where to study, because top universities are predominantly located in urban regions. Estimates from a selection model show that even after controlling for sorting prior to labor market entry, the ‘best and brightest’ are still more likely to start working in urban regions, and are also more likely to remain there over long time periods. We conclude that a) urban regions are true magnets for high-ability graduates, and that b) studies of human capital sorting need to account for selection processes to and from universities, because neglecting mobility prior to labor market entry is likely to lead to underestimation of the extent of sorting to urban regions.
    Keywords: human capital; university graduates; spatial sorting; migration; labor mobility; ability; geography of talent; spatial selection
    JEL: I23 J24 J61 R12
    Date: 2016–03–17
  6. By: Sun, Bo; Liu, Qi
    Abstract: This paper studies how private information in hedging outcomes affects the design of managerial compensation when hedging instruments serve as a double-edged sword in that they may be used for both corporate hedging and earnings management. On the one hand, financial vehicles can offer customized contracts that are closely tailored to manage specific risk and improve hedging efficiency. On the other hand, involvement in hedging may give rise to manipulation through misstatement of the value estimates. We show that the use of privately-observed hedging may actually require greater pay-for-performance in managerial compensation. The cross-sectional variations in managerial compensation lend support to our model.
    Keywords: Managerial compensation ; Corporate hedging
    JEL: D82 D86 G38 J31
    Date: 2016–03
  7. By: Ghazala Azmat (Queen Mary University of London and Centre for Economic Performance, LSE); Marc Möller (University of Bern)
    Abstract: Do the contests with the largest prizes attract the most-able contestants? To what extent do contestants avoid competition? In this paper, we show, theoretically and empirically, that the distribution of abilities plays a crucial role in determining contest choice. Complete sorting exists only when the proportion of high-ability contestants is sufficiently small. As this proportion increases, high-ability contestants shy away from competition and sorting decreases, such that, reverse sorting becomes a possibility. We test our theoretical predictions with a large panel data set containing contest choice over twenty years. We use exogenous variation in the participation of highly-able competitors to provide empirical evidence for the relationship among prizes, competition, and sorting.
    Keywords: Contests, Competition, Sorting, Incentives
    JEL: L20 M52 D02
    Date: 2016–03
  8. By: Azmat, Ghazala (Queen Mary, University of London); Bagues, Manuel F. (Aalto University); Cabrales, Antonio (University College London); Iriberri, Nagore (University of the Basque Country)
    Abstract: This paper studies the effect of providing feedback to college students on their position in the grade distribution by using a randomized control experiment. This information was updated every six months during a three-year period. In the absence of treatment, students' underestimate their position in the grade distribution. The treatment significantly improves the students' self-assessment. We find that treated students experience a significant decrease in their educational performance, as measured by their accumulated GPA and number of exams passed, and a significant improvement in their self-reported satisfaction, as measured by survey responses obtained after information is provided but before students take their exams. Those effects, however, are short lived, as students catch up in subsequent periods. Moreover, the negative effect on performance is driven by those students who underestimate their position in the absence of feedback. Those students who overestimate initially their position, if anything, respond positively.
    Keywords: relative performance feedback, ranking, randomized field experiment, school performance
    JEL: J71 J44
    Date: 2016–03
  9. By: Michael Weinhardt; Alexia Meyermann; Stefan Liebig; Jürgen Schupp
    Abstract: In 2012/13, a survey of German employers was conducted using face-to-face and paper-and-pencil interviews (N = 1,708; response rate = 30.1%). Establishments were sampled based on address information provided by employed participants in the Socio-Economic Panel (SOEP) study. The information obtained from both surveys can be linked in order to create a linked employer–employee data set concerning organizational strategies and labor market outcomes (N = 1,834). Paradata were collected regarding several aspects of the survey: contact forms informed about the fieldwork process; an interviewer survey provided information about the interviewer staff; every interview situation was evaluated separately by interviewers to learn more about the response process in establishments; the editing process was reassessed; and 31 interviews were audiotaped to gain insights into the interviewing process. This project report covers the design of the study, the data collection stage, and field outcomes. It evaluates the establishment survey itself, as well as the linked SOEP-LEE data set, by looking at selectivity in nonresponse and at measurement errors overall. The establishment data and the linked SOEP-LEE data are available for secondary use at the research data centers of the SOEP at DIW Berlin and at the Data Service Center for Business and Organizational Data (DSC-BO) at Bielefeld University (DOI:10.7478/s0549.1.v1).
    Date: 2016

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