nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2016‒11‒06
thirteen papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. The Diversity of Personnel Practices and Firm Performance By Martins, Pedro S.
  2. Dynamic Contracting with Long-Term Consequences: Optimal CEO Compensation and Turnover By Suvi Vasama; ;
  3. Understanding the Response to Financial and Non-Financial Incentives in Education: Field Experimental Evidence Using High-Stakes Assessments By Burgess, Simon; Metcalfe, Robert; Sadoff, Sally
  4. Work-Related Learning and Skill Development in Europe: Does Initial Skill Mismatch Matter? By Ferreira Sequeda, Maria; Künn-Nelen, Annemarie; de Grip, Andries
  5. Locus of Control and Performance Appraisal By Heywood, John S.; Jirjahn, Uwe; Struewing, Cornelia
  6. The Pros and Cons of Workplace Tournaments By Roman M. Sheremeta
  7. All in the family? CEO succession and firm organization By Renata Lemos; Daniela Scur
  8. Using Goals to Motivate College Students: Theory and Evidence from Field Experiments By Clark, Damon; Gill, David; Prowse, Victoria L.; Rush, Mark
  9. Dynamic nonmonetary incentives By Daniel Bird; Alexander Frug
  10. Gender, competition and performance:Evidence from real tournaments By Peter Backus; María Cubel; Matej Guid; Santiago Sánchez-Pages; Enrique Lopez Manas
  11. The secret to job satisfaction is low expectations: How perceived working conditions differ from actual ones By S. Cicognani; M. Cioni; M. Savioli
  12. A Model of Human Capital Formation and Contractual Unpredictability By Nick Frazier; Flavio Cunha
  13. Which Are the Benefits of Having More Female Leaders? Evidence from the Use of Part-Time Work in Italy By Devicienti, Francesco; Grinza, Elena; Manello, Alessandro; Vannoni, Davide

  1. By: Martins, Pedro S. (Queen Mary, University of London)
    Abstract: Personnel economics tends be based on single-firm case studies. Here we examine the personnel practices of nearly 5,000 firms, over a period of 20 years, using detailed matched employer-employee panel data from Portugal. In the spirit of Baker et al. (1994a,b), we consider different dimensions of personnel management within each firm: worker turnover, the role of job levels and human capital as wage determinants, the dispersion of wages within job levels, the importance of tenure in terms of promotions and exits, and the scope for careers. We find a large degree of diversity in most of these practices across firms. Moreover, some personnel practices are shown to be robust predictors of higher levels of firm performance, even after controlling for time-invariant firm heterogeneity and other variables: low wage dispersion at low and intermediate job levels and a tight relationship between human capital variables and wages.
    Keywords: personnel economics, job levels, wages, big data
    JEL: M51 M52 J31
    Date: 2016–10
  2. By: Suvi Vasama; ;
    Abstract: We examine optimal managerial compensation and turnover policy in a principal-agent model in which the firm output is serially correlated over time. The model captures a learning-by-doing feature: higher effort by the manager increases the quality of the match between the firm and the manager in the future. The optimal incentive scheme entails an inefficiently high turnover rate in the early stages of the employment relationship. The optimal turnover probability depends on the past performance and the likelihood of turnover decreases gradually with superior performance. With good enough past performance, the turnover policy reaches efficiency; the manager is never retained if it is inefficient to do so. The manager’s compensation depends on the firm value and the optimal performance-compensation relation increases with past performance.
    JEL: C73 D82 D86
    Date: 2016–10
  3. By: Burgess, Simon (University of Bristol); Metcalfe, Robert (University of Chicago); Sadoff, Sally (University of California, San Diego)
    Abstract: We analyze the impact of incentivizing students' effort during the school year on performance on high-stakes assessments in a field experiment with 63 low-income high schools and over 10,000 students. We contribute to the literature on education incentives by incentivising inputs rather than output, by focusing on high stakes outcomes, and by comparing financial and non-financial rewards. We take advantage of our large sample and rich data to explore heterogeneity in the effects of incentives, and identify a "right tail" of underperforming students who experience a significant impact on high stakes assessments. Among students in the upper half of the distribution of incentive effectiveness, exam scores improve by 10% to 20% of a standard deviation, equal to about half the attainment gap between poor and non-poor students.
    Keywords: test scores, pupil incentives, pupil behaviour
    JEL: I21 I28
    Date: 2016–10
  4. By: Ferreira Sequeda, Maria (ROA, Maastricht University); Künn-Nelen, Annemarie (ROA, Maastricht University); de Grip, Andries (ROA, Maastricht University)
    Abstract: This paper provides more insight into the relevance of the assumption of human capital theory that the productivity of job-related training is driven by the improvement of workers' skills. We analyse the extent to which training and informal learning on the job are related to employee skill development and consider the heterogeneity of this relationship with respect to workers' skill mismatch at job entry. Using data from the 2014 European Skills Survey, we find – as assumed by human capital theory – that employees who participated in training or informal learning show greater improvement of their skills than those who did not. The contribution of informal learning to employee skill development appears to be larger than that of training participation. Nevertheless, both forms of learning are shown to be complementary. This complementarity between training and informal learning is related to a significant additional improvement of workers' skills. The skill development of workers who were initially underskilled for their job seems to benefit the most from both training and informal learning, whereas the skill development of those who were initially overskilled benefits the least. Work-related learning investments in the latter group seem to be more functional in offsetting skill depreciation than in fostering skill accumulation.
    Keywords: training, informal learning, skill development, skill mismatch, human capital
    JEL: J24 M53
    Date: 2016–10
  5. By: Heywood, John S. (University of Wisconsin, Milwaukee); Jirjahn, Uwe (University of Trier); Struewing, Cornelia (University of Trier)
    Abstract: This work contributes to the literature demonstrating an important role for psychological traits in labor market decisions. We show that West German workers with an internal locus of control sort into jobs with performance appraisals. Appraisals provide workers who believe they control their environment a tool to demonstrate their value and achieve their goals. We confirm that workers who are risk tolerant also sort into jobs with performance appraisals but explain why the influence of the locus of control and risk tolerance should not be additive. We demonstrate this by estimating a routinely large and significantly negative interaction in our sorting equations. We also show that important patterns of sorting are revealed only when taking into account the interaction of locus of control and risk tolerance.
    Keywords: locus of control, risk attitude, performance appraisal, performance pay, sorting, extrinsic rewards, intrinsic motivation
    JEL: D03 J33 M52
    Date: 2016–10
  6. By: Roman M. Sheremeta (Weatherhead School of Management, Case Western Reserve University and Economic Science Institute, Chapman University)
    Abstract: Tournaments are commonly used in the workplace to determine promotion, assign bonuses, and motivate personal development. Tournament-based contracts can be very effective in eliciting high effort, often outperforming other compensation contracts, but they can also have negative consequences for both managers and workers. The benefits and disadvantages of workplace tournaments have been identified in theoretical, empirical, and experimental research over the past several decades. Based on these findings, I provide suggestions and guidelines for when it might be beneficial to use tournaments in the workplace.
    Keywords: tournaments, contests, competition, contracts, workplace
    JEL: C7 C8 C9 J4 J7 L1 L2 M1 M5
    Date: 2016
  7. By: Renata Lemos; Daniela Scur
    Abstract: Family firms are the most prevalent type of firm in the world and account for a large proportion of the economic activity and employment, especially in developing countries. We consider firms to be “family controlled” when the founding family owns over 25% of shares and the CEO is a family member. In this paper we investigate the relationship between family control and firm organization and performance in the manufacturing sector of primarily emerging economies. To do this we collect a new detailed dataset of the succession history in terms of ownership (who owns the shares) as well as control (who is the CEO) for over 800 firms in Latin America, Africa and Europe. We merge this with a unique dataset on firm performance and organizational structures, including on quality of managerial practices. We exploit exogenous variation in the composition of the family CEO’s children, and use it as an instrumental variable for family ownership and control. Our results suggest that family-owned-and-controlled firms are worse managed, with coefficients being over twice larger under 2SLS than OLS. In general the negative link seems to stem from the family vs non-family control rather than simply family or non-family ownership. Firms owned by families but with non-family CEOs do not suffer from the deficit in management quality.
    Date: 2016
  8. By: Clark, Damon (University of California, Irvine); Gill, David (Purdue University); Prowse, Victoria L. (Purdue University); Rush, Mark (University of Florida)
    Abstract: Will college students who set goals for themselves work harder and perform better? In theory, setting goals can help time-inconsistent students to mitigate their self-control problem. In practice, there is little credible evidence on the causal effects of goal setting for college students. We report the results of two field experiments that involved almost four thousand college students in total. One experiment asked treated students to set goals for performance in the course; the other asked treated students to set goals for a particular task (completing online practice exams). We find that performance-based goals had no discernible impact on course performance. In contrast, task-based goals had large and robust positive effects on the level of task completion, and task-based goals also increased course performance. Further empirical analysis indicates that the increase in task completion induced by setting task-based goals caused the increase in course performance. We also find that task-based goals were more effective for male students. We develop new theory that reinforces our empirical results by suggesting two key reasons why task-based goals might be more effective than performance-based goals: overconfidence and uncertainty about performance. Since task-based goal setting is low-cost, scaleable and logistically simple, we conclude that our findings have important implications for educational practice and future research.
    Keywords: goal, goal setting, higher education, field experiment, self-control, present bias, time inconsistency, commitment device, loss aversion, reference point, task-based goal, performance-based goal, self-set goal, performance uncertainty, overconfidence, student effort, student performance, educational attainment, MOOC
    JEL: I23 C93
    Date: 2016–10
  9. By: Daniel Bird; Alexander Frug
    Abstract: We study a principal-agent interaction where investments and rewards arrive stochastically over time, and are privately observed by the agent. Investments (costly for the agent, beneficial for the principal) can be concealed by the agent. Rewards (beneficial for the agent, costly for the principal) can be forbidden by the principal. We ask how rewards should be used and which investments incentivized. We identify the unique optimal mechanism and analyze the dynamic investment and compensation policies. When all rewards are identical, the unique optimal way to provide incentives is by a "carte-blanche" to pursue all rewards arriving in a predetermined timeframe.
    Keywords: Dynamic mechanism design, Uncertain action availability.
    JEL: D82
    Date: 2016–10
  10. By: Peter Backus (University of Manchester& Barcelona Institute of Economics (IEB)); María Cubel (Universitat de Barcelona); Matej Guid (University of Ljubljana); Santiago Sánchez-Pages (Universitat de Barcelona); Enrique Lopez Manas (Google Developer Expert)
    Abstract: There is a growing literature looking at how men and women respond differently to competition. We contribute to this literature by studying gender differences in performance in a high-stakes and male dominated competitive environment, expert chess tournaments. Our findings show that women underperform compared to men of the same ability and that the gender composition of games drives this effect. Using within player variation in the conditionally random gender of their opponent, we find that women earn significantly worse outcomes against male opponents. We examine the mechanisms through which this effect operates by using a unique measure of within game quality of play. We find that the gender composition effect is driven by women playing worse against men, rather than by men playing better against women. The gender of the opponent does not affect a male player’s quality of play. We also find that men persist longer against women before resigning. These results suggest that the gender composition of competitions affects the behavior of both men and women in ways that are detrimental to the performance of women. Lastly, we study the effect of competitive pressure and find that players’ quality of play deteriorates when stakes increase, though we find no differential effect over the gender composition of games.
    Keywords: Competition, Gender, Stereotype threat, Chess
    JEL: D03 J16 J24 J70 L83 M50
    Date: 2016
  11. By: S. Cicognani; M. Cioni; M. Savioli
    Abstract: Working conditions exert a major influence on accidents and illnesses at work as well as on job satisfaction and health, yet very little research has examined the determinants of working conditions. By exploiting the Italian Labour Force Survey, this paper provides evidence on the underlying factors affecting working conditions. It provides a behavioural interpretation of the results, which stems from the discrepancy between actual and expected working conditions. In light of this interpretation, workers would declare their perceived working conditions influenced by the difference between the actual and the expected working conditions. Variables concerning personal characteristics, such as gender, education and being employed in the first job, shift expectations about working conditions and accordingly perceived working conditions. On the contrary, variables related to work characteristics, such as working full time, with shifts and in a large place, affect actual and thus perceived working conditions (negatively).
    JEL: D84 J24 J28
    Date: 2016–10
  12. By: Nick Frazier (Rice University); Flavio Cunha (Rice univesity)
    Abstract: We study the effect of restricting the contracting space within a partial equilibrium environment. We develop a model of human capital accumulation where jobs have multiple characteristics including variability in hours and wages. We highlight the difficulties of using standard panel data to estimate and distinguish between worker preferences and the primitives of the offer function --- an issue with serious implications when comparing employee welfare. We propose using stated preferences data to trace out worker preferences over a variety of job attributes which we then take to the NLSY97 to recover the parameters underlying the distribution of job offers allowing for dependence on accumulated human capital. This approach provides a richer characterization of the process and permits us to quantify the effect of restricting the offer space on the labor force directly.
    Date: 2016
  13. By: Devicienti, Francesco (University of Turin); Grinza, Elena (University of Turin); Manello, Alessandro (University of Turin); Vannoni, Davide (University of Turin)
    Abstract: Using three waves of a uniquely rich survey on Italian private firms, we explore the impact of female managers on the use of part-time work. Building on a literature arguing that female leaders are more sensitive to their employees' needs and more self-transcendent than their male counterparts, we assess whether such attitudes manifest themselves also in relation to working time arrangements. Results indicate that female managers are indeed more responsive to their employees' needs: they heavily limit the employment of involuntary part-time work, correspondingly increasing full-time employment, and concede more part-time arrangements to employees asking for them. All in all, our results show that there are some hitherto unexplored benefits from increasing the number of female leaders: on the one hand, they strongly contain the widespread phenomenon of involuntary part-time employment and, on the other hand, they enhance the work-life balance of workers engaged in child care or elderly care activities.
    Keywords: female managers, part-time work, involuntary part-time work, work-life balance, meeting employees' needs, self-transcendence
    JEL: J23 J41 M51
    Date: 2016–10

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