nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2016‒07‒16
eleven papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Affirmative Action and Team Performance By Felix Koelle
  2. What Do Performance Appraisals Do? By Peter Cappelli; Martin Conyon
  3. Matching firms, managers and incentives By Oriana Bandiera; Luigi Guiso; Andrea Prat; Raffaella Sadun
  4. Unfair Pay and Health By Armin Falk; Fabian Kosse; Ingo Menrath; Pablo Emilio Verde; Johannes Siegrist
  5. Incentive schemes, private information and the double-edged role of competition for agents By Christina Bannier; Eberhard Feess; Natalie Packham; Markus Walzl
  6. Leading Leadership style to motivate cultural-oriented female employees in the I.T sector of developing country: I.T Sectors responses from Pakistan By Haque, Adnan ul; Faizan, Riffat; Zehra, Nasreen; Baloch, Akhtar; Nadda, Vipin; Riaz, Fayyaz
  7. A Theory of Education and Health By Galama, Titus; van Kippersluis, Hans
  8. Learning About Oneself: The Effects of Signaling Academic Ability on School Choice By Bobba, Matteo; Frisancho, Veronica
  9. Insurance in Human Capital Models with Limited Enforcement By Krebs, Tom; Kuhn, Moritz; Wright, Mark L. J.
  10. Competitive Strategy, Performance Appraisal and Firm Results By Bayo-Moriones, Alberto; Galdon-Sanchez, Jose Enrique; Martinez-de-Morentin, Sara
  11. Does Employee Stock Ownership Work? Evidence from publicly-traded firms in Japan By KATO Takao; MIYAJIMA Hideaki; OWAN Hideo

  1. By: Felix Koelle (Faculty of Management, Economics and Social Sciences, University of Cologne)
    Abstract: We experimentally investigate spillover effects of affirmative action policies on team performance and the willingness to work in teams. We find that such policies in form of gender quotas do not harm performance and cooperation within teams, and do not discourage selection into teams.
    Keywords: Affirmative action, cooperation, competition, teams, selection, experiments
    Date: 2016–07
  2. By: Peter Cappelli; Martin Conyon
    Abstract: This paper investigates employee performance appraisals using data from a single US firm between 2001 and 2007. We find that performance appraisals are both informative and drive important components of the employment contract. We find that employee appraisal scores vary considerably both between and within individuals over time. In addition, we show that employee performance appraisal scores are related to a range of important employment outcomes, including merit pay and bonuses, promotions, demotions and dismissals, as well as employee quits.
    JEL: J33 J41 J63
    Date: 2016–07
  3. By: Oriana Bandiera; Luigi Guiso; Andrea Prat; Raffaella Sadun
    Abstract: We exploit a unique combination of administrative sources and survey data to study the match between firms and managers. The data includes manager characteristics, such as risk aversion and talent; firm characteristics, such as ownership; detailed measures of managerial practices relative to incentives, dismissals and promotions; and measurable outcomes, for the firm and for the manager. A parsimonious model of matching and incentive provision generates an array of implications that can be tested with our data. Our contribution is twofold. We disentangle the role of risk-aversion and talent in de-termining how firms select and motivate managers. In particular, risk-averse managers are matched with firms whose compensation scheme depends less on performance. We also show that empirical findings linking governance, incentives, and performance that are typically observed in isolation, can instead be interpreted within a simple unified matching framework.
    JEL: N0
    Date: 2015–07
  4. By: Armin Falk (Universität Bonn); Fabian Kosse (University of Bonn); Ingo Menrath (Heinrich Heine University, Department of Medical Sociology); Pablo Emilio Verde (Heinrich Heine University, Department of Medical Sociology); Johannes Siegrist (Heinrich Heine University, Department of Medical Sociology)
    Abstract: This paper investigates physiological responses to perceptions of unfair pay. We use an integrated approach exploiting complementarities between controlled lab and representative panel data. In a simple principal-agent experiment agents produce revenue by working on a tedious task. Principals decide how this revenue is allocated between themselves and their agents. Throughout the experiment we record agents’ heart rate variability, which is an indicator of stress-related impaired cardiac autonomic control, and which has been shown to predict coronary heart disease in the long-run. Our findings establish a link between unfair payment and heart rate variability. Building on these findings, we further test for potential adverse health effects of unfair pay using observational data from a large representative panel data set. Complementary to our experimental findings we show a strong and significant negative association between unfair pay and health outcomes, in particular cardiovascular health.
    Keywords: fairness, social preferences, Inequality, heart rate variability, Health, experiment, SOEP
    JEL: C91 D03 D63 I14
    Date: 2016–06
  5. By: Christina Bannier; Eberhard Feess; Natalie Packham; Markus Walzl
    Abstract: This paper examines the effect of imperfect labor market competition on the efficiency of compensation schemes in a setting with moral hazard and risk-averse agents, who have private information on their productivity. Two vertically differentiated firms compete for agents by offering contracts with fixed and variable payments. The superior firm employs both agent types in equilibrium, but the competitive pressure exerted by the inferior firm has a strong impact on contract design: For high degrees of vertical differentiation, i.e. low competition, low-ability agents are under-incentivized and exert too little effort. For high degrees of competition, high-ability agents are over-incentivized and bear too much risk. For a range of intermediate degrees of competition, however, agents' private information has no impact and both contracts are second-best. Interim efficiency of the least-cost separating allocation in the inferior firm is a sufficient condition for equilibrium existence. If this is violated, there can only be equilibria where the inferior firm ''overbids'', i.e. where it would not break even when attracting both agent types. Adding horizontal differentiation allows for pure-strategy equilibria even when there would be no equilibrium without overbidding in the pure vertical model, but equilibria with overbidding fail to exist.
    Keywords: Incentive compensation, screening, imperfect labor market competition, vertical differentiation, horizontal differentiation, risk aversion
    JEL: D82 D86 J31 J33
    Date: 2016–07
  6. By: Haque, Adnan ul; Faizan, Riffat; Zehra, Nasreen; Baloch, Akhtar; Nadda, Vipin; Riaz, Fayyaz
    Abstract: This empirical study explores different Leadership styles' dimensions influencing culturaloriented female employees' motivation in rapidly improving Pakistan's I.T sector. Hypothetico-Inductive-Deductive model was adapted to construct theoretical framework by opting mixed method under realism philosophy. Sample size is 357 female employees working in software houses of Pakistan's 10 cities selected by combining convenience sampling and stratified sampling techniques. Survey questionnaire contained close-ended questions based on Bass and Avolio (1994) Full Range MLQ Model and WMS. Moreover, 36 female employees were interviewed selected from top five business cities' of Pakistan's software houses through convenience sampling. Results indicate transformational leadership style's dimensions are dominant in motivating female employees scoring overall 0.75. Moreover, transactional has moderate positive relation (0.38) with sub-motivational variables. Though, 'Management-By-Expectation (Passive)' along with Laissez-faire leadership style has no relationship with sub-variables of motivation. In I.T sector of Pakistan, female employees are mainly motivated by interpersonal relations with supervisors, peers, and subordinate, friendly environment, flexibility, socialization, recognition, responsibility, social rewards, and most importantly improved working conditions. It is essential to motivate female workers through 'walk-the-talk' approach along with coerce and accurate vision.
    Keywords: Transformational Leadership, Transactional Leadership, Laissez Faire Leadership, Dimensions of Leadership Styles, Cultural-oriented female workforce, I.T Industry
    JEL: L0 L2 L29 L8 L86 M1 M12
    Date: 2015–10–18
  7. By: Galama, Titus; van Kippersluis, Hans
    Abstract: This paper presents a unified theory of human capital with both health capital and, what we term, skill capital endogenously determined within the model. By considering joint investment in health capital and in skill capital, the model highlights similarities and differences in these two important components of human capital. Health is distinct from skill: health is important to longevity, provides direct utility, provides time that can be devoted to work or other uses, is valued later in life, and eventually declines, no matter how much one invests in it (a dismal fact of life). Lifetime earnings are strongly multiplicative in skill and health, so that investment in skill capital raises the return to investment in health capital, and vice versa. The theory provides a conceptual framework for empirical and theoretical studies aimed at understanding the complex relationship between education and health, and generates several new testable predictions.
    Keywords: health investment, lifecycle model, human capital, health capital, optimal control
    JEL: D91 I10 I12 J00 J24
    Date: 2015–03
  8. By: Bobba, Matteo; Frisancho, Veronica
    Abstract: This paper examines the role of perceived academic ability in shaping curricular choices in secondary school. We design and implement a field experiment that provides individualized feedback on performance in a mock version of the admission test taken to gain entry into high school in the metropolitan area of Mexico City. This intervention reduces the gap between expected and actual performance, shrinks the variance of the individual ability distributions and shifts stated preferences over high school tracks, with better performing students choosing more academically-oriented options. Such a change in application portfolios affects placement outcomes within the school assignment system, while it does not seem to entail any short-term adjustment costs in terms of high school performance. Guided by a simple model in which Bayesian agents choose school tracks based on their perceived ability distribution, we empirically document the interplay between variance reductions and mean changes in beliefs enabled by the information intervention.
    Keywords: information, Bayesian updating, biased beliefs, school choice.
    JEL: D83 I21 I24 J24
    Date: 2016–06
  9. By: Krebs, Tom (University of Mannheim - IZA); Kuhn, Moritz (University of Bonn - IZA); Wright, Mark L. J. (Federal Reserve Bank of Chicago)
    Abstract: This paper develops a tractable human capital model with limited enforceability of contracts. The model economy is populated by a large number of long-lived, risk-averse households with homothetic preferences who can invest in risk-free physical capital and risky human capital. Households have access to a complete set of credit and insurance contracts, but their ability to use the available financial instruments is limited by the possibility of default (limited contract enforcement). We provide a convenient equilibrium characterization that facilitates the computation of recursive equilibria substantially. We use a calibrated version of the model with stochastically aging households divided into 9 age groups. Younger households have higher expected human capital returns than older households. According to the baseline calibration, for young households less than half of human capital risk is insured and the welfare losses due to the lack of insurance range from 3 percent of lifetime consumption (age 40) to 7 percent of lifetime consumption (age 23). Realistic variations in the model parameters have non-negligible effects on equilibrium insurance and welfare, but the result that young households are severely underinsured is robust to such variations.
    Keywords: Human capital; Household; Insurance; Risk; Limited Enforcement
    JEL: D52 E21 E24 J24
    Date: 2016–03–26
  10. By: Bayo-Moriones, Alberto (University of Navarra); Galdon-Sanchez, Jose Enrique (Universidad Pública de Navarra); Martinez-de-Morentin, Sara (Universidad Pública de Navarra)
    Abstract: In this study, we address the relationship between performance appraisal and competitive strategy, as well as the impact of this relationship on firm performance. The results indicate that the adoption of developmental performance appraisal and the use of administrative performance appraisal are higher among firms that pursue differentiation strategies compared to those competing on costs. Regarding firm performance, the interaction between a developmental appraisal system and a quality strategy displays higher return on equity and sales per employee. Those firms that combine a focus on innovation with administrative performance appraisal also enjoy higher performance. Finally, when the firm competes on the basis of cost reduction, the use of administrative appraisal increases the sales per employee.
    Keywords: performance appraisal, competitive strategy, firm performance, developmental appraisal, administrative appraisal
    JEL: M12 M52
    Date: 2016–07
  11. By: KATO Takao; MIYAJIMA Hideaki; OWAN Hideo
    Abstract: This paper provides novel evidence on the effects of employee stock ownership (ESO), using new panel data on Japanese ESO plans for a highly representative sample of publicly-traded firms in Japan (covering more than 75% of all firms listed on Tokyo Stock Exchange) over 1989-2013. Unlike most prior studies, we focus on the effects of changes in varying attributes of existing ESO—the effects on the intensive margin. Our fixed effect estimates show that an increase in the strength of the existing ESO plans measured by stake per employee results in statistically significant productivity gains. Furthermore, such productivity gains are found to lead to profitability gains since wage gains from ESO plans are statistically significant yet rather modest. Our analysis of Tobin's Q suggests that the market tends to view such gains from ESO plans as permanent. We further find that increasing the stake of the existing core participants is more effective in boosting gains from ESO plans than bringing in more employees into the trust. Reassuringly, our key results are found to be robust to the use of instrumental variables to account for possible endogeneity of ESO plans. Finally, we explore possible interplays between ESO plans and firm characteristics such as ownership structure and firm size/age. First, the positive effects on productivity, profitability, wages and Tobin's Q are found to become larger as the proportion of powerful institutional investors and foreign investors rises, implying that the growing importance of such powerful outside shareholders may be reducing the adverse managerial entrenchment effect of ESO plans. Second, productivity gains from ESO plans are found to be more limited for smaller and younger firms. We interpret the finding as evidence in favor of the institutional complementarity view that ESO plans are an integral part of the Japanese High Performance Work System (HPWS)—a complementary cluster of human resource management practices which are more pervasive among larger and older firms in Japan.
    Date: 2016–06

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