nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2016‒04‒30
eleven papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. The Adverse Consequences of Tournaments: Evidence from a Field Experiment By De Paola, Maria; Gioia, Francesca; Scoppa, Vincenzo
  2. Incentive Contracts and Downside Risk Sharing. By Bernard Sinclair-Desgagné; Sandrine Spaeter
  3. Incomplete contracts and the internal organization of firms By Philippe Aghion; Nick Bloom; John Van Reenen
  4. Paid Vacation Use - The Role of Works Councils By Laszlo Goerke; Sabrina Jeworrek
  5. Rising Work Complexity but Decreasing Returns By Pikos, Anna Katharina; Thomsen, Stephan L.
  6. Incentives and Moral Hazard: Plot Level Productivity of Factory-Operated and Outgrower-Operated Sugarcane Production in Ethiopia By Wedimu, Mengistu A.; Henningsen, Arne; Czekaj, Tomasz G.
  7. Where Do Social Preferences Come From? By Chaning Jang; John Lynham
  8. Why the Youth Are so Eager for Academic Education? Evidence from Iran's Labor Market By Nader Habibi; GholamReza Keshavarz Haddad
  9. Taylorism Revisited: Culture, Management Theory and Paradigm-Shift By Morgen Witzel; Malcolm Warner
  10. Task ordering in incentives under externalities By Agastya, Murali; Bag, Parimal Kanti; Pepito, Nona
  11. Tell Me How to Rule: Leadership, Delegation, and Voice in Cooperation By Marco Faillo; Federico Fornasari; Luigi Mittone

  1. By: De Paola, Maria (University of Calabria); Gioia, Francesca (University of Edinburgh); Scoppa, Vincenzo (University of Calabria)
    Abstract: We run a field experiment to investigate whether competing in rank-order tournaments with different prize spreads affects individual performance. Our experiment involved students from an Italian University who took an intermediate exam in which one part was awarded on the basis of their relative performance. Students were matched in pairs on the basis of their high school grades and each pair was randomly assigned to one of three different tournaments. Random assignment neutralizes selection effects and allows us to investigate if larger prize spreads increase individual effort. We do not find any positive effect of larger prizes on students' performance and in several specifications we do find a negative effect. Furthermore, we show that the effect of prize spreads on students' performance depends on their degree of risk-aversion: competing in tournaments with large spreads negatively affects the performance of risk-averse students, while it does not produce any effect on students who are more prone to take risks.
    Keywords: rank-order tournaments, incentives, prize spread, risk-aversion, randomized experiment
    JEL: J33 J31 J24 D81 D82 C93
    Date: 2016–03
  2. By: Bernard Sinclair-Desgagné; Sandrine Spaeter
    Abstract: This paper seeks to characterize incentive compensation in a principal-agent moral hazard setting in which the principal is prudent, or downside risk averse, as many situations (such as that of a patient in hospital or a regulator dealing with food safety) suggest she should be. We show that optimal incentive pay should then be 'approximately concave' in performance, the approximation being closer the more downside risk averse the principal is compared to the agent. Limiting the agent's liability would improve the approximation, but taxing the principal would make it coarser. The notion of an approximately concave function we introduce here to describe the pay-performance relationship is relatively recent in mathematics; it is intuitive and translates into concrete empirical implications, notably for the composition of incentive pay. We also clarify which measure of prudence - among the various ones proposed in the literature - is relevant to investigate the tradeoff between downside risk sharing and incentives.
    Keywords: Pay-performance relationship; executive compensation; downside risk aversion; approximate concavity.
    JEL: D82 M12 M52
    Date: 2016
  3. By: Philippe Aghion; Nick Bloom; John Van Reenen
    Abstract: We survey the theoretical and empirical literature on decentralization within firms. We first discuss how the concept of incomplete contracts shapes our views about the organization of decision-making. We then overview the empirical evidence on the determinants of decentralization and on the effects of decentralization on firm performance. A number of factors highlighted in the theory are shown to be important in accounting for delegation, such as heterogeneity and congruence of preferences as proxied by trust. Empirically, competition, human capital, and IT also appear to foster decentralization. There are substantial gaps between theoretical and empirical work and we suggest avenues for future research in bridging this gap (JEL O31, O32, O33, F23).
    JEL: L22 L23
    Date: 2014–05
  4. By: Laszlo Goerke (Institute for Labour Law and Industrial Relations in the EU, University of Trier); Sabrina Jeworrek (Institute for Labour Law and Industrial Relations in the EU, University of Trier)
    Abstract: We investigate the relationship between co-determination at the plant level and paid vacation in Germany. From a legal perspective, works councils have no impact on vacation entitlements, but they can affect their use. Employing data from the German Socio-Economic Panel (SOEP), we find that male employees who work in an establishment, in which a works council exists, take almost two additional days of paid vacation annually, relative to employees in an establishment without institution. The effect for females is much smaller, if discernible at all. The data suggests that this gender gap might bue due to the fact that women exploit vacation entitlements more comprehensively than men already in the absence of a works council.
    Keywords: Gender Difference, German Socio-Economic Panel (SOEP), Paid Vacation, Works Councils
    JEL: J22 J32 J33 J53 M54
    Date: 2016–01
  5. By: Pikos, Anna Katharina (Leibniz University of Hannover); Thomsen, Stephan L. (NIW Hannover, Leibniz Universität Hannover)
    Abstract: Work complexity can be an important factor contributing to the observed employment and wage developments. Using German data, we find that it increased substantially between 1986 and 2012. Work complexity was higher for high-educated employees in the past but differences have leveled out in 2012 due to a steeper increase in complexity among lower educated. Although complexity is associated with higher wages, expected returns have decreased substantially since 1986. Lower education was associated with higher returns to complexity but these decreased over time, too. Thus, the more complexity becomes "normal", the less it is important in determining the wage.
    Keywords: task-based approach, work complexity, returns to work complexity
    JEL: J21 J24 J31
    Date: 2016–04
  6. By: Wedimu, Mengistu A.; Henningsen, Arne; Czekaj, Tomasz G.
    Abstract: We investigate the rather unique contractual arrangement between one of the largest sugar factories in Ethiopia and its adjacent outgrower associations. The only significant difference between the sugarcane production on the factory-operated plantation and on the outgrower-operated plots is the remuneration system and thus, the incentives to the workers. We compare the productivity of these two production models based on a new cross-sectional plot-level data set. As sugarcane production depends on various exogenous factors that are measured as categorical variables (e.g. soil type, cane variety, etc.), we estimate the production function by a nonparametric kernel regression method that takes into account both continuous and categorical explanatory variables without assuming a functional form. Our results show that outgrower-operated plots have−ceteris paribus−a significantly higher productivity than factory-operated plots, which can be explained by outgrowers having stronger incentives to put more effort in their work than the employees of the sugar factory.
    Keywords: Crop Production/Industries, International Development,
    Date: 2015
  7. By: Chaning Jang (Department of Psychology, Princeton University); John Lynham (Department of Economics & UHERO, University of Hawaii at Manoa; Center for Ocean Solutions, Stanford University)
    Abstract: Where do preferences for fairness come from? We use a unique field setting to test for a spillover of sharing norms from the workplace to a laboratory experiment. Fishermen working in teams receive random income shocks (catching fish) that they must regularly divide among themselves. We demonstrate a clear correlation between sharing norms in the field and sharing norms in the lab. Furthermore, the spillover effect is stronger for fishermen who have been exposed to a sharing norm for longer, suggesting that our findings are not driven by selection effects. Our results are consistent with the hypothesis that work environments shape social preferences.
    Keywords: ultimatum game; social preferences; fairness; workplace spillovers
    JEL: Q2 C9 C7 B4 D1
    Date: 2015–08
  8. By: Nader Habibi (Brandeis University); GholamReza Keshavarz Haddad (Haddad)
    Abstract: In this article we estimate the wage difference between over-educated and adequately educated workers in a sample of semi-skilled and low skill occupations in Iran’s labor market. Our results show that the over-educated workers in these job categories enjoy a wage premium in the range of 10% to 25% for their excess education. While this relative advantage has gradually declined for private sector employees over (2001-2014), it has remained stable for public sector jobs. The result is attributable to the fact that salary and benefits for public sector employees are directly linked to education attainment and their work experience. Our findings offer an explanation for the strong desire of Iranian youth for university education. If a university graduate finds a job that matched her specialization she will enjoy a higher salary than a high school graduate. If she cannot find an adequate job and has to accept a job for which she is over-educated, she still enjoys a wage premium over her co-workers who are not over-educated. We observe that the over-education wage premium is larger for public sector employees.
    Keywords: wages, over-education, average treatment effect, propensity score matching, Iran
    JEL: J45 J31 I26 I23 C54
    Date: 2016–04
  9. By: Morgen Witzel (Centre for Leadership, Department of Management, University of Exeter); Malcolm Warner (Cambridge Judge Business School, University of Cambridge)
    Abstract: In this article, we look at the role of culture, management theory and paradigm-shift vis a vis their implications for general management. We focus in depth on the influence of the European Enlightenment on eighteenth and nineteenth century industrialism and the emergence of a possibly dominant paradigm in management theory in the twentieth century, namely 'Scientific Management' or 'Taylorism', as it became known. We also examine how, in turn, it shaped the next development in the narrative - 'Human Relations' - and its successors 'Organizational Behaviour' and 'Human Resource Management'.
    Keywords: culture, enlightenment, general management, management theory, paradigm shift, scientific management, Taylorism
    Date: 2015–07
  10. By: Agastya, Murali (University of Sydney, 1School of Economics); Bag, Parimal Kanti (National University of Singapore, Faculty of Arts and Social Sciences, Department of Economics); Pepito, Nona (Essec Business School)
    Abstract: In a two-task team project with observable task outcomes, optimal incentives prioritize tasks differently depending on task externalities. When the tasks are independent, Principal follows a decreasing order by placing more essential task first. A task is more essential if its failure compromises the overall project's chance of success from a task-specific cutoff level by a greater percentage. This definition has no systematic relations to the variance of task outcomes. In particular, a more risky task can be less essential or more essential. Under externalities, essentiality and impact jointly determine the optimal ordering. A task with much higher impact can be performed early even if it is less essential. Optimal task ordering thus raises subtle new issues and forms an integral part in team incentives. Our analysis provides some contrast with recent team incentives results.
    Keywords: externalities in teams; sequencing; essential tasks; joint projects; team incentives
    JEL: D20 D80
    Date: 2016–01–25
  11. By: Marco Faillo; Federico Fornasari; Luigi Mittone
    Abstract: Following some recent studies, we experimentally test the effect of intra-group leadership in a public good experiment. Specifically, individuals taking part in our experiment are randomly assigned either the role of leader or the role of follower. Leaders take part in a public good game, aware of the fact that every decision they make directly affects their followers. In this sense, our experimental setting combines the dimension of leadership in cooperation with the one of delegated agents. In our experiment, we find that leadership produces two main effects: subjects contribute more, and tend to punish more frequently. In spite of the presence of higher contributions, we observe lower payoffs; these are caused by an aggressive behavior that push leaders to mane an undue use of punishment. Allowing one-sided communication between followers and leaders provide a different effect: communication reduces decision makers’ aggressiveness, leading to lower contributions and punishment, but better results in terms of final payoffs. The same welfare can be reached when leadership is not implemented at all; this suggests that the presence of a dictatorial leader in public goods with punishment can be beneficial only when there is communication.
    Keywords: Voluntary contribution experiment, Leadership, Punishment
    JEL: C72 C92 H41 O12
    Date: 2016

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