nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2016‒09‒04
ten papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Loss Averse Agents and Lenient Supervisors in Performance Appraisal By Lucia Marchegiani; Tommaso Reggiani; Matteo Rizzolli
  2. Framing Manipulations in Contests: A Natural Field Experiment By Fuhai Hong; John List; Tanjim Hossain
  3. A Time to Make Laws and a Time to Fundraise? On the Relation between Salaries and Time Use for State Politicians By Mitchell Hoffman; Elizabeth Lyons
  4. Essays on Delegated Search and Temporary Work Agencies By Raattamaa, Tomas
  5. Games with Money and Status: How Best to Incentivize Work By Pradeep Dubey; John Geanakoplos
  6. Can a Bonus Overcome Moral Hazard? An Experiment on Voluntary Payments, Competition, and Reputation in Markets for Expert Services By Vera Angelova; Tobias Regner;
  7. Wage Discrimination against Immigrants: Measurement with Firm-Level Productivity Data By Kampelmann, Stephan; Rycx, Francois
  8. Relational capital in lending relationships: Evidence from European family firms By Marco Cucculelli; Valentina Peruzzi; Alberto Zazzaro
  9. Some Transaction Cost Effects of Authoritarian Management By Vasilev, Aleksandar; Todorova, Tamara
  10. Whistleblowing: Incentives and situational determinants By Schmolke, Klaus Ulrich; Utikal, Verena

  1. By: Lucia Marchegiani (University of Rome 3); Tommaso Reggiani (LUMSA University); Matteo Rizzolli (LUMSA University)
    Abstract: A consistent empirical literature shows that in many organizations supervisors systematically overrate their employees’ performance. Such leniency bias is at odds with the standard principalagent model and has been explained with causes that range from social interactions to fairness concerns and to collusive behavior between the supervisor and the agent. We show that the principal-agent model, extended to consider loss-aversion and reference-dependent preferences, predicts that the leniency bias is comparatively less detrimental to effort provision than the severity bias. We test this prediction with a laboratory experiment where we demonstrate that failing to reward deserving agents is significantly more detrimental than rewarding undeserving agents. This offers a novel explanation as to why supervisors tend to be lenient in their appraisals.
    Keywords: Performance appraisal, TypeI and TypeII errors, Leniency bias, Severity bias, Economic experiment, Loss aversion, Reference-dependent preferences.
    JEL: C91 M50 J50
    Date: 2016–07
  2. By: Fuhai Hong; John List; Tanjim Hossain
    Abstract: Exploiting findings that losses loom larger than gains, studies have shown that framing manipulations can increase productivity of workers. Using a natural field experiment that exogenously manipulates wage bonuses within contests in a Chinese high-tech manufacturing facility, we show that how loss aversion affects worker behavior critically depends on the incentive scheme as well as the framing manipulation. Four sets of two identical teams competed against each other to win a bonus given to the team, within a set, with the higher average hourly productivity over the week. In each set, the bonus was framed as a reward or gain for one team and as a punishment or loss for the other. Average weekly productivity was slightly higher under the loss treatment, but this increase was statistically insignificant. However, the team under the loss treatment was at least 35% more likely to win the contest. As teams' payoffs are based on relative productivity under a contest, framing effect is much stronger in terms of relative productivity. Finally, workers seemingly responded to the bonus by increasing the quality of production as well as quantity-defect rate fell as productivity increased.
    Date: 2015
  3. By: Mitchell Hoffman; Elizabeth Lyons
    Abstract: Paying higher salaries is often believed to enhance worker effort, leading workers to work harder to avoid getting fired. However, workers may also respond to higher salaries by focusing on tasks that most directly affect getting fired (as opposed to those that contribute most to productivity). We explore these issues by analyzing the relationship between the level of compensation and time use for US state legislators. Using data on time use and legislator salaries, we show that higher salary is associated with legislators spending more time on fundraising. In contrast, higher salary is also associated with less time spent on legislative activities and has no clear relation to time spent on constituent services. Subgroup analysis broadly supports our interpretation of the data.
    JEL: D72 H70 M52
    Date: 2016–08
  4. By: Raattamaa, Tomas (Department of Economics, Umeå University)
    Abstract: Paper [I] models a game, where two temporary work agencies (TWAs) compete to fill a vacancy at a client firm (CF). They simultaneously choose how much effort to expend, based on their expectation of how good their opponents best candidate will be. I then show that this will make the TWAs overconfident, as the rational way of judging your own probability of winning is not looking at the opponents expected best, but comparing how much effort your opponent will expend. Paper [II] examines the misaligned incentives in the temporary work agency sector, where we first look at pure recruiting contracts, that either require payment on delivery, or payment on some specified point in time. We then look at the incentives of recruit-and-rent contracts, where the worker is leased to the client firm. We assume that the better the worker, the higher the probability that the client firm is going to want to hire him/her. If that happens then the TWA will no onger get revenues from said worker, incentivizing the TWA to not always deliver the first match it finds, if it is too good. Lastly we look at how competition can dampen this perverse incentive. Paper [III] models the waiting behavior that can occur if a TWA is contracted to find a worker for a specific time far in the future; the TWA will postpone effort. This behavior is modeled for two types of TWAs; one that is rational and plans ahead, and another that does not plan ahead at all, but instead only looks at the immediate future. I find that the one that only looks at the immediate future starts exerting effort earlier than the planner. After looking at optimal contracts under perfect monitoring and hidden action I provide two extensions. I first show that for the principal to want to delegate search to a rational TWA, the agent has to be better than the CF, by some factor, as it has to make up in efficiency what the principal loses in moral hazard, when the agent waits longer than the principal would like it to. Lastly I prove that it is profit maximizing for the principal to contract one agent and give it a deadline earlier than when the principal would need the worker, and then replace that agent with a competitor if the first one has not succeeded by that earlier deadline. Paper [IV] estimates at the effect of family experience on relative transition probability into the temporary work agency sector. Using register data for all of Sweden we run a bias-reduced logistic regression, where we include various factors that affect the probability of young adults (aged 18-34) entering the sector. This paper ties in to the literature on occupational inheritance, as well as the literature on changing social norms. We find that having had a parent, sibling or partner in the TWA sector increases your probability of entering the sector yourself.
    Keywords: delegated search; principal-agent; matching; transition probability; temporary work agencies
    JEL: D81 D83 D86 J41 J44
    Date: 2016–08–19
  5. By: Pradeep Dubey (SUNY); John Geanakoplos (Cowles Foundation, Yale University)
    Abstract: Status is greatly valued in the real world, yet it has not received much attention from economic theorists. We examine how the owner of a firm can best combine money and status to get her employees to work hard for the least total cost. We find that she should motivate workers of low skill mostly by status and high skill mostly by money. Moreover, she should do so by using a small number of titles and wage levels. This often results in star wages to the elite performers. By analogy, the governance of a society should pay special attention to the status concerns of ordinary citizens, which may often be accomplished by reinforcing suitable social norms.
    Keywords: Status, Incentives, Wages
    JEL: C70 I20 I30
    Date: 2016–08
  6. By: Vera Angelova; Tobias Regner;
    Abstract: Interactions between players with private information and opposed interests are often prone to bad advice and inecient outcomes, e.g. markets for nancial or health care services. In a deception game we investigate experimentally which factors could improve advice quality. Besides advisor competition and identi ability we add the possibility for clients to make a voluntary payment, a bonus, after observing advice quality. We observe a positive e ect on the rate of truthful advice when the bonus creates multiple opportunities to reciprocate, that is, when the bonus is combined with identi ability (leading to several client-advisor interactions over the course of the game) or competition (allowing one advisor to have several clients who may reciprocate within one period). Moreover, identi ability signi cantly increases truth-telling under competition.
    JEL: C91 D03 D82 G20 I11
    Date: 2016–08
  7. By: Kampelmann, Stephan (Free University of Brussels); Rycx, Francois (Free University of Brussels)
    Abstract: This paper is one of the first to use employer-employee data on wages and labor productivity to measure discrimination against immigrants. We build on an identification strategy proposed by Bartolucci (2014) and address firm fixed effects and endogeneity issues through a diff GMM-IV estimator. Our models also test for gender-based discrimination. Empirical results for Belgium suggest significant wage discrimination against women and (to a lesser extent) against immigrants. We find no evidence for double discrimination against female immigrants. Institutional factors such as firm-level collective bargaining and smaller firm sizes are found to attenuate wage discrimination against foreigners, but not against women.
    Keywords: workers' origin, discrimination, productivity, wages, gender, linked employer-employee panel data
    JEL: J15 J16 J24 J31 J7
    Date: 2016–08
  8. By: Marco Cucculelli (Università Politecnica delle Marche); Valentina Peruzzi (Università Politecnica delle Marche); Alberto Zazzaro (Università di Napoli Federico II)
    Abstract: In this paper we empirically investigate the effects of active family involvement in the company’s management on bank-firm lending relationships and access to credit. Based on the trade-off between relational and management human capital, we explore whether the relational capital embodied in the family leadership of the company influences the lending relationships with the main bank in terms of information sensitivity and duration. Then, we test whether family firms with family CEOs are more likely to experience a credit restriction from banks than family firms appointing professional CEOs external to the family. Results indicate that family businesses appointing family managers are significantly more likely to maintain soft-information-based and longer-lasting lending relationships. However, having family executives does not have a negative impact on firm’s access to credit, while the creation of soft-information-based and long-lasting lending relationships significantly reduces the likelihood of experiencing credit restrictions. In view of these findings, family relational capital seems to have a univocal beneficial impact on bank-firm relationship in our sample.
    Keywords: Family firm, family CEO, soft-information, relational capital, relationship lending, credit rationing.
    JEL: D22 G21 G22
    Date: 2016–08
  9. By: Vasilev, Aleksandar; Todorova, Tamara
    Abstract: This paper studies the transaction-cost economizing effects of authoritarian management in organizations and systems subject to higher transaction costs originating from various sources. We analyze the nature, mechanisms and transaction-cost aspects of the authoritarian management style. We argue that the higher the transaction costs of internal organization, the more autocratic the manager is likely to be. We study the features of authoritarian managers in general but more specifically in the context of high transaction cost systems such as East European societies with significant transactional or organizational opportunism as well as other sources of market failure.
    Keywords: authoritarian management,transaction costs,opportunism,multidivisional structure,information transfer
    JEL: D23 L23 M12
    Date: 2016
  10. By: Schmolke, Klaus Ulrich; Utikal, Verena
    Abstract: Law makers increasingly try to capitalize on individuals having acquired knowledge of corporate crimes or other misconduct by inducing them to blow the whistle. In a laboratory experiment we measure the effectiveness of incentives on the willingness to report such misconduct to a sanctioning authority. We find that fines for non-reporting insiders, rewards and even simple commands increase the probability of whistleblowing. We find the strongest effect for fines. Situational determinants also influence the willingness to blow the whistle: Insiders who are negatively affected by the misconduct are more likely to blow the whistle than non-affected or profiting insiders. Those (negatively affected) victims are also sensitive to the misconduct's impact on the authority sanctioning the misconduct (public authority or employer): Whistleblowing is more likely if the enforcement authority is negatively affected compared to positively or not affected.
    Keywords: whistleblowing,incentives,situational determinants,experiment
    JEL: C91 D82 K42 M59
    Date: 2016

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