nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2016‒09‒25
six papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. The Structure of Banker's Pay By Bennett, Benjamin; Gopalan, Radhakrishnan; Thakor, Anjan V.
  2. Prizes versus Contracts as Incentives for Innovation By Che, Yeon-Koo; Iossa, Elisabetta; Rey, Patrick
  3. How You Pay Affects How You Do: Financial Aid Type and Student Performance in College By Peter Cappelli; Shinjae Won
  4. The third worker: Assessing the trade-off between employees and contractors By Pedro S. Martins
  5. Job Design and Skill Developments in the Workplace By Russo, Giovanni
  6. Do Women Ask? By Artz, Benjamin; Goodall, Amanda H.; Oswald, Andrew J.

  1. By: Bennett, Benjamin (Ohio State University); Gopalan, Radhakrishnan (Washington University in Saint Louis); Thakor, Anjan V. (Washington University in Saint Louis and European Corporate Governance Institute)
    Abstract: While executive compensation is often blamed for the excessive risk taking by banks, little is known about the operating performance incentives used in the finance industry both prior to and subsequent to the recent crisis. We provide a comprehensive analysis of incentive design -- the link of compensation to operating performance -- in financial firms and compare incentive structures in financial firms to those in non-financial firms. Top executives in financial firms are paid less than their counterparts in non-financial firms of similar size and performance. Banks (and insurance firms) link a larger fraction of top executive pay to short-term accounting metrics like ROE and EPS and a smaller fraction to (long-term) stock price. Performance targets for bankers are not related to the risk of the bank, and ROE targets are not appropriately adjusted for leverage. Consequently, the design of executive compensation in banking may encourage both high leverage and risk-taking, and our evidence provides a potential explanation for the strong positive correlation that we document between the extent of short-term pay for bank CEOs and the risk of the bank before the financial crisis.
    JEL: F34 G32 G33 G38 K42
    Date: 2016–08
  2. By: Che, Yeon-Koo; Iossa, Elisabetta; Rey, Patrick
    Abstract: Procuring an innovation involves motivating a research effort to generate a new idea and then implementing that idea efficiently. If research efforts are unverifiable and implementation costs are private information, a trade-off arises between the two objectives. The optimal mechanism resolves the tradeoff via two instruments: a monetary prize and a contract to implement the project. The optimal mechanism favors the innovator in contract allocation when the value of innovation is above a certain threshold, and handicaps the innovator otherwise. A monetary prize is employed as an additional incentive but only when the value of innovation is suficiently high.
    Keywords: Contract rights, Inducement Prizes, Innovation, Procurement and R&D.
    JEL: D44 D82 H57 O31 O38 O39
    Date: 2016–09
  3. By: Peter Cappelli; Shinjae Won
    Abstract: Students receiving financial aid pay different amounts for equivalent education and do so in different ways: Grants, which do not have to be repaid, loans, which are paid back in the future, and work-study, pay-as-you-go. We examine the effects of need-based aid independent of study ability on student outcomes – grade point average in particular - controlling for student background and attributes they had prior to college. We also analyze grades within colleges. The results suggest that students receiving need-based grants do significantly better in college than those not receiving financial aid while those paying for college with loans perform significantly worse than students receiving other forms of aid.
    JEL: D03 I21 I23 J38
    Date: 2016–09
  4. By: Pedro S. Martins
    Abstract: Firms make labour demand decisions not only between permanent and non-permanent employees but also increasingly more between employees and contractors. Indeed, this third work format can be attractive, also when employment protection law is restrictive. This paper examines empirically this scarcely researched trade-off drawing on a recent reform in Portugal that cut the severance pay of new employee hires while leaving unchanged the regulations affecting contractors. Our analysis draws on difference-in-differences methods and original high-frequency firm-level panel data on both employees and contractors. We find that the reduction in severance pay had a large relative positive effect on the wage bills and worker counts of employees compared to contractors. This result, robust to a number of checks, highlights the role of labour regulations as an additional driver of more flexible labour formats.
    Keywords: Employment law, segmentation, duality, future of work
    JEL: J23 J41 J63
    Date: 2016–09
  5. By: Russo, Giovanni (European Centre for the Development of Vocational Training (Cedefop))
    Abstract: We investigate the relationship between job complexity and the skills development of adult workers in Europe using the Cedefop European Skills and Jobs Survey (ESJS). The results suggest that challenging workplaces, workplaces in which jobs are designed to include complex tasks, and which place high demands on workers' skills, also stimulate workers' skills development. Increasing the degree of job complexity has positive and robust effects on the degree of skill development, and so does an increase in work experience (tenure). The analysis stresses the importance of on-the-job learning and contextual workplace characteristics for adult workers' skills development.
    Keywords: job characteristics, job complexity, skills, skills development, learning
    JEL: J24
    Date: 2016–09
  6. By: Artz, Benjamin (University of Wisconsin, Oshkosh); Goodall, Amanda H. (Cass Business School); Oswald, Andrew J. (University of Warwick)
    Abstract: Women typically earn less than men. The reasons are not fully understood. Previous studies argue that this may be because (i) women 'don't ask' and (ii) the reason they fail to ask is out of concern for the quality of their relationships at work. This account is difficult to assess with standard labor-economics data sets. Hence we examine direct survey evidence. Using matched employer-employee data from 2013-14, the paper finds that the women-don't-ask account is incorrect. Once an hours-of-work variable is included in 'asking' equations, hypotheses (i) and (ii) can be rejected. Women do ask. However, women do not get.
    Keywords: matched employer-employee data, female discrimination, wages, gender
    JEL: J31 J71
    Date: 2016–09

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