nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2016‒07‒02
ten papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Firms and labor market inequality: Evidence and some theory By Card, David; Cardoso, Ana Rute; Heining, Jörg; Kline, Patrick
  2. Training, quality of management and firm level bargaining By Damiani, Mirella; Ricci, Andrea
  3. Motivating with Simple Contracts By Juan F. Escobar; Carlos Pulgar
  4. Dynamic Contracts with Random Monitoring By Andrei Barbos
  5. Impact of caregiver incentives on child health: Evidence from an experiment with Anganwadi workers in India By William A. Masters; Prakarsh Singh
  6. Matching Workers By Espen R. Moen; Eran Yashiv
  7. Managing the diversity: board age diversity, directors’ personal values, and bank performance By Talavera, Oleksandr; Yin, Shuxing; Zhang, Mao
  8. Management as a Technology? By Bloom, Nicholas; Sadun, Raffaella; Van Reenen, John
  9. Team Vs. Individual Tournaments: Evidence From Prize Structure In Esports By Dennis Coates; Petr Parshakov
  10. Because of you I did not give up - How peers affect perseverance By Gerhards, Leonie; Gravert, Christina

  1. By: Card, David; Cardoso, Ana Rute; Heining, Jörg (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Kline, Patrick
    Abstract: "We review the literature on firm-level drivers of labor market inequality. There is strong evidence from a variety of fields that standard measures of productivity - like output per worker or total factor productivity - vary substantially across firms, even within narrowly-defined industries. Several recent studies note that rising trends in the dispersion of productivity across firms mirror the trends in the wage inequality across workers. Two distinct literatures have searched for a more direct link between these two phenomena. The first examines how wages are affected by differences in employer productivity. Studies that focus on firm-specific productivity shocks and control for the non-random sorting of workers to more and less productive firms typically find that a 10% increase in value-added per worker leads to somewhere between a 0.5% and 1.5% increase in wages. A second literature focuses on firm-specific wage premiums, using the wage outcomes of job changers. This literature also concludes that firm pay setting is important for wage inequality, with many studies finding that firm wage effects contribute approximately 20% of the overall variance of wages. To interpret these findings, we develop a model where workplace environments are viewed as imperfect substitutes by workers, and firms set wages with some degree of market power. We show that simple versions of this model can readily match the stylized empirical findings in the literature regarding rent-sharing elasticities and the structure of firm-specific pay premiums." (Author's abstract, IAB-Doku) ((en))
    Keywords: Unternehmen, Produktivitätsunterschied, Lohnunterschied, Einkommenseffekte, abhängig Beschäftigte, Wertschöpfung, Arbeitsplatzwechsel, zwischenbetriebliche Mobilität, Lohnfindung, Betrieb, Lohntheorie, Gewinnbeteiligung, qualifikationsspezifische Faktoren
    JEL: D22 J31 J42
    Date: 2016–06–13
  2. By: Damiani, Mirella; Ricci, Andrea
    Abstract: Abstract The double aim of this paper is to investigate the link between firm training behaviour and the adoption of performance-related pay (PRP) and to verify how the quality of management contributes to explaining the strength of this link. Using Ordinary Least Squares Estimates and Fixed Effect Estimates for a sample of Italian firms, we find that training is a significant determinant of firm level bargaining on PRP. Furthermore, we find that managerial quality plays a significant positive role and suggest that this is because managerial quality favours the evolution of social norms based on wage bonuses that enhance trust, sustain collaborative relationships and motivate co-workers to train each other. Jel Classifications: M53; M52; J50; I20
    Keywords: Keywords: Training; Compensation; Management; Education
    JEL: J3 J33 M52 M53
    Date: 2016–06–21
  3. By: Juan F. Escobar; Carlos Pulgar
    Abstract: In practice, incentive schemes are rarely tailored to the specific characteristics of contracting parties. However, according to economic theory, optimal contracts should be highly dependent on individual conditions. We reconcile these observations in the context of a principal-agent model with both moral hazard and adverse selection. Motivating an agent could be increasingly costly to the principal because a more productive agent could also be more able to manipulate the terms of the contract. As a result, the principal may optimally pool some types by offering a contract with constant transfer and bonus. We also explore parameterizations where the optimal contract is fully separating but simple contracts attain a significant portion of the optimal welfare. JEL classiffication: D86, L51, L22. Key words: Keywords: Moral hazard, adverse selection, regulation, simple contracts.
    Date: 2016
  4. By: Andrei Barbos (Department of Economics, University of South Florida)
    Abstract: In environments where a principal contracts with many agents who each execute numerous independent tasks, it is often infeasible to evaluate an agent'?s performance on all tasks. Incentives under moral hazard are instead provided by monitoring only a subset of randomly selected tasks. We characterize optimal dynamic contracts implemented with this type of random monitoring technology. We consider a stochastic environment where the agent?'s cost of effort varies over time, and analyze situations where this cost is public or private information. In an optimal contract, the terms the agent is promised when monitoring reveals compliance are as good as when no monitoring is performed, and for some cost types are better. These latter types receive a monitoring reward. We also elicit the dynamics of contract parameters over time. As time passes and the agent becomes richer, the monitoring reward decreases as the threat of forgoing the promised stream of future compensation provides sufficient incentives for compliance.
    Keywords: Dynamic Contracts, Random Monitoring, Optimal Contracts, Moral Hazard
    JEL: D82 D86
    Date: 2016–06
  5. By: William A. Masters; Prakarsh Singh
    Abstract: This paper provides evidence for the effectiveness of performance pay among government caregivers to improve child health in India. In a controlled study of 160 daycare centers serving over 4000 children, we randomly assign workers to receive performance pay or fixed bonuses of roughly similar expected value, and test for differences in malnutrition among the children in their care. We find that performance pay reduces the prevalence of weight-for-age malnutrition by about 5 percentage points in 3 months. This effect is sustained in the medium term with a renewal of incentives but the differential growth rate fades away once the scheme is discontinued. Fixed bonuses lead to smaller-sized effects and only in the medium-term. Both treatments appear to improve worker effort and communication with mothers, who in turn feed a more calorific diet to their children at home.
    Keywords: Performance Pay, Public Health Information, Child Malnutrition
    JEL: O1 I1 M5
    Date: 2016
  6. By: Espen R. Moen (Økonomisk institutt Universitetet i Oslo); Eran Yashiv (Tel Aviv University; Centre for Macroeconomics (CFM))
    Abstract: This paper studies the matching of workers within the firm when the productivity of workers depends on how well they match with their co-workers. The firm acts as a coordinating device and derives value from this role. It is shown that a worker's contribution to firm value changes over time in a non-trivial way as co-workers are replaced by new workers. The paper derives optimal hiring and replacement policies, including an optimal stopping rule, and characterizes the resulting equilibrium in terms of worker flows, firm output and the distribution of firm values. Simulations of the model reveal a rich pattern of worker turnover dynamics and their connections to the resulting firm values distribution. The paper stresses the role of horizontal differences in worker productivity, which are different from vertical, assortative matching issues. It derives the rent from organizational capital, with worker complementarities playing a key role. We compare the model to match-specific productivity models and explore the essential differences, with the emphasis laid on worker interactions and complementarities.
    Keywords: Worker interactions, Firm value, Complementarity, Worker value, Organizational capital, Salop circle, Hiring, Firing, Match Quality, Optimal Stopping.
    JEL: E23 E24 D23 J24
    Date: 2016–06
  7. By: Talavera, Oleksandr; Yin, Shuxing; Zhang, Mao
    Abstract: This study examines the role of board age diversity on bank performance. Using a sample of 97 Chinese banks, we document a negative and significant relationship between age diversity and bank performance. To further investigate the negative link between age diversity and bank performance, we decompose age diversity into personal value diversities. In particular, a variety of directors’ views with respect to work, prudence, and wealth harm bank performance. This indicates that age diversity among directors can affect bank performance via their values.
    Keywords: corporate governance, board of directors, age diversity, value diversity, bank performance
    JEL: G21 G30 J1 J10
    Date: 2016
  8. By: Bloom, Nicholas (Stanford University); Sadun, Raffaella (Harvard Business School); Van Reenen, John (CEP, London School of Economics)
    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.
    Keywords: management practices, productivity, competition
    JEL: L2 M2 O32 O33
    Date: 2016–06
  9. By: Dennis Coates; Petr Parshakov (National Research University Higher School of Economics)
    Abstract: This study tests the implications of tournament theory using data on eSports (video game) competitions. We incorporate team production with the theory of rank order elimination tournaments since in our analysis, competitors in an elimination tournament are groups rather than individuals. In this setting, the issue of proper incentives becomes more complicated than in the normal tournament model. Our findings demonstrate that the prize structure is convex in rank order which means that the contestants in eSports tournaments are risk averse. The results for the team games are more consistent with the tournament theory than the results for individual games. From the practical point of view, we provide decision-makers in both sports and business with the insights about the compensation design with respect to importance of the competition and its type.
    Keywords: tournament theory, eSports, video games, team production.
    JEL: Z20 J3
    Date: 2016
  10. By: Gerhards, Leonie (Department of Economics, University of Hamburg); Gravert, Christina (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Various empirical papers have shown that peers affect productivity and behavior in the workplace. However, the mechanisms through which peers influence each other are still largely unknown. In this laboratory experiment we study a situation in which individuals might look at their peers' behavior to motivate themselves to endure in a task that requires perseverance. We test the impact of unidirectional peer effects under individual monetary incentives, controlling for ability and tactics. We find that peers significantly increase their observers' perseverance, while knowing about being observed does not significantly affect behavior. In a second experiment we investigate the motives to self-select into the role of an observing or an observant subject and what kind of peers individuals deliberately choose. Our findings provide first insights on the perception of peer situations by individuals and new empirical evidence on how peer groups emerge.
    Keywords: grit; perseverance; laboratory experiment; peer effects; real effort
    JEL: C91 D03 J24 M50
    Date: 2016–06

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