nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2016‒06‒18
eight papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Monopoly Capital and Capitalist Management: Too Many Managers? By Lambert, Thomas
  2. Management as a Technology? By Nicholas Bloom; Raffaella Sadun; John Van Reenen
  3. Reputation with Opportunities for Coasting By Heski Bar-Isaac; Joyee Deb
  4. Testing for the Ratchet Effect: Evidence from a Real-Effort Work Task By Cardella, Eric; Depew, Briggs
  5. Developing a Set of Organizational and Economic Measures of Construction Personnel Policy in the Health Ministry of Russian Federation in a Phased Transition of Industry Workers to 'Effective Contracts' By Gabueva, L.A.
  6. Striking strikers. A case of player mispricing in Association Football By Lionel Page; Markus Schaffner; Marie Beigelman
  7. Incentive of risk sharing and trust formation: Experimental and survey evidence from Bangladesh By Shoji, Masahiro
  8. Designing contests between heterogeneous contestants: An experimental study of tie-breaks and bid-caps in all-pay auctions By Llorente-Saguer, Aniol; Sheremeta, Roman M.; Szech, Nora

  1. By: Lambert, Thomas
    Abstract: The mainstream or neoclassical economics view that labor is rewarded according to its productivity has been extended to managers and management teams as justification for the levels of compensation that they receive. Additionally, the management concept of “span of management” has been used to explain the total number of and per employee number of managers in any organization along with the economics assumption that the appropriate span of management is where the marginal productivity of the last manager employed equals his/her marginal cost, or wage. On the other hand, Marxists and institutionalists hold different views of the roles and purposes of managers within organizations and attempt to explain these through either the view of managers exploiting workers on behalf of owners or the view of managers exploiting both workers and owners in order to advance their own agenda. This research note examines managerial compensation and intensity from both traditional/mainstream and alternative views by focusing on measures of managerial salaries, employee productivity, return on owners’ equity, return on assets, and rates of workers exploitation.
    Keywords: bureaucracy, economic systems, managers, and productivity
    JEL: B51 D24
    Date: 2016–06–14
  2. By: Nicholas Bloom; Raffaella Sadun; John Van Reenen
    Abstract: Are some management practices akin to a technology that can explain company and national productivity, or do they simply reflect contingent management styles? We collect data on core management practices from over 11,000 firms in 34 countries. We find large cross-country differences in the adoption of basic management practices, with the US having the highest size-weighted average management score. We present a formal model of “Management as a Technology”, and structurally estimate it using panel data to recover parameters including the depreciation rate and adjustment costs of managerial capital (both found to be larger than for tangible non-managerial capital). Our model also predicts (i) a positive effect of management on firm performance; (ii) a positive relationship between product market competition and average management quality (part of which stems from the larger covariance between management with firm size as competition strengthens); and (iii) a rise (fall) in the level (dispersion) of management with firm age. We find strong empirical support for all of these predictions in our data. Finally, building on our model, we find that differences in management practices account for about 30% of cross-country total factor productivity differences.
    JEL: L2 M2 O32 O33
    Date: 2016–06
  3. By: Heski Bar-Isaac (Rotman School of Management, University of Toronto); Joyee Deb (School of Management, Yale University)
    Abstract: Reputation concerns can discipline agents to take costly effort and generate good outcomes. But what if outcomes are not always observed? We consider a model of reputation with shifting observability, and ask how this affects agents’ incentives. We identify a novel and intuitive mechanism by which infrequent observation or inattention can actually strengthen reputation incentives and encourage effort. If an agent anticipates that outcomes may not be observed in the future, the benefits from effort today are enhanced due to a “coasting” effect. By investing effort when outcomes are more likely observed, the agent can improve her reputation, and when the audience is inattentive in the future, she can coast on this reputation without additional effort. We show that future opportunities to rest on one’s laurels can lead to greater overall effort and higher efficiency than constant observation. This has implications for the design of review systems or performance feedback systems in organizations. We provide a characterization of the optimal observability structure to maximize efficient effort in our setting.
    JEL: C73 D82 L14 L14
    Date: 2016–05
  4. By: Cardella, Eric (Texas Tech University); Depew, Briggs (Louisiana State University)
    Abstract: The "ratchet effect" refers to a phenomenon where workers whose compensation is based on productivity strategically restrict their output, relative to their capability, because they rationally anticipate that high levels of output will be met with increased or "ratcheted-up" expectations in the future. While there is ample anecdotal evidence suggesting the presence of the ratchet effect in real workplaces, it is difficult to actually empirically identify output restriction among workers. In this study, we implement a novel experimental design using a real-effort work task and a piece-rate incentive scheme to directly test for the presence of the ratchet effect using two different methods for evaluating productivity: (i) when productivity is evaluated based on the output of each individual worker, and (ii) when productivity is evaluated collectively based on the output of a group of workers. We find strong evidence of the ratchet effect when productivity is evaluated at the individual-level. However, we find very little evidence of the ratchet effect when productivity is evaluated collectively at the group-level. We attribute the latter result to the free-riding incentive that emerges when productivity is evaluated at the group-level. Furthermore, we find the ratchet effect re-emerges if workers are able to communicate. Our experimental design, combined with using a real-effort work task, also allows us to shed light on an important dynamic implication of the ratchet effect that has not yet been examined in the literature – the role of the ratchet effect on future productivity via learning-by-doing.
    Keywords: ratchet effect, output restriction, piece-rate pay, real-effort task, learning-by-doing
    JEL: J30 J40 D70 D01 C92
    Date: 2016–06
  5. By: Gabueva, L.A. (Russian Presidential Academy of National Economy and Public Administration (RANEPA))
    Abstract: Improving the quality of health free medical services can not be achieved without the presence of highly qualified professionals with a medical (pharmaceutical) and other education employees providing medical and interim activities in the health sector. At the same time to estimate the level of achievement of qualifications, skills and abilities in health care organizations must provide for systematic measures. Provide them with the ability to consistently realizing innovative changes in the personnel management of medical organizations according to the conditions and characteristics of the subjects of the Russian Federation. Under these conditions requires scientific and practical substantiation connection of structural reforms in the areas of health and motivational incentives for achieving the expected results improve the efficiency of the industry.
    Keywords: effective contract, HR, personnel, salary
    Date: 2015–03–23
  6. By: Lionel Page; Markus Schaffner; Marie Beigelman
    Abstract: We investigate whether variations in players' market values across positions in Association Football (soccer) reflect variations in contribution to the team on-field performance. Using data from the British Premier League, we find that the marginal effect of strikers' (and to some extent goal keepers') market value on team performance is lower than for other players. This suggests that strikers are overpriced relative to other players. The market value of these players is less related to their on-field performance than for players placed in defence or in mid-field.
    Keywords: sports economics; professional team sports; efficiency wages
    Date: 2016–06–09
  7. By: Shoji, Masahiro
    Abstract: Using data from a unique household survey and an artefactual field experiment conducted in rural Bangladesh, this study evaluates the impact on trust in community members of an incentive to maintain a risk-sharing arrangement between villagers. Risk sharing is a major opportunity for cooperation in rural economies, and the experience of cooperation could facilitate trust. In order to test this hypothesis, this study characterizes the incentive for risk sharing by the patterns of exogenous income shocks in the real world and risk preference, and trust in community members is elicited experimentally. The empirical results from dyadic regression demonstrate that villagers connected by a stronger incentive form higher level of trust. It is also found that villagers are more likely to share risks in villages that have stronger incentives. These findings suggest that the introduction of formal insurance, which reduces the incentive of risk sharing, could break down trust.
    Keywords: Trust formation; risk sharing; experiment; Bangladesh
    JEL: C91 D12
    Date: 2016–06–13
  8. By: Llorente-Saguer, Aniol; Sheremeta, Roman M.; Szech, Nora
    Abstract: A well-known theoretical result in the contest literature is that greater heterogeneity decreases performance of contestants because of the "discouragement effect." Leveling the playing field by favoring weaker contestants through bid-caps and favorable tie-breaking rules can reduce the discouragement effect and increase the designer's revenue. We test these predictions in an experiment. Our data show that indeed, strengthening weaker contestants through tie-breaks and bid-caps significantly diminishes the discouragement effect. Bid-caps can also improve revenue. Most deviations from Nash equilibrium can be explained by the level-k model of reasoning.
    Keywords: all-pay auction,rent-seeking,bid-caps,tie-breaks,contest design
    JEL: C72 C91 D72
    Date: 2016

This nep-hrm issue is ©2016 by Patrick Kampkötter. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.