nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2016‒12‒11
ten papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Dynamic Incentive Effects of Team Formation: Experimental Evidence By Gall, Thomas; Hu, Xiaocheng; Vlassopoulos, Michael
  2. Crowding out effect and sorting in competitive labor markets with motivated workers By Antoni Cunyat Cunyat
  3. Do Female Executives Make a Difference? The Impact of Female Leadership on Gender Gaps and Firm Performance By Luca Flabbi; Mario Macis; Andrea Moro; Fabiano Schivardi
  4. Performance Information and Personnel Decisions in the Public Sector: The Case of School Principals By Julie Berry Cullen; Eric A. Hanushek; Gregory Phelan; Steven G. Rivkin
  5. Physician performance pay: Evidence from a laboratory experiment By Brosig-Koch, Jeannette; Hennig-Schmidt, Heike; Kairies-Schwarz, Nadja; Wiesen, Daniel
  6. Through the Grapevine: Network Effects on the Design of Executive Compensation Contracts By Susanna Gallani
  7. Glass Ceilings or Sticky Floors? An analysis of the gender wage gap across the wage distribution in Japan By HARA Hiromi
  8. On the Interpretation of Non-Cognitive Skills: What Is Being Measured and Why It Matters By Humphries, John Eric; Kosse, Fabian
  9. Paying Bank Risk Professionals to Lie About Bank Loan Loss Provisioning Process By Ozili, Peterson K
  10. Human Resource Management Practices and Firm Outcomes: Evidence from Vietnam By Dang, Thang; Dung, Thai Tri; Phuong, Vu Thi; Vinh, Tran Dinh

  1. By: Gall, Thomas (University of Southampton); Hu, Xiaocheng (University of Southampton); Vlassopoulos, Michael (University of Southampton)
    Abstract: Optimal team composition has been the focus of exhaustive analysis, academic and otherwise. Yet, much of this analysis has ignored possible dynamic effects: e.g., anticipating that team formation is based on prior performance will affect prior performance. We test this hypothesis in a lab experiment with two stages of a real effort task. Participants first work individually without monetary incentives and are then assigned to teams of two where compensation is based on team performance. Our results are consistent with a simple investment-cum-matching model: pairing the worst performing individuals with the best yields 20% lower first stage effort than random matching. Pairing the best with the best, however, yields 5% higher first stage effort than random matching. In line with the theory the latter result is more pronounced when the task has less scope for learning-by-doing. Moreover, pairing the best with the best achieves the same effort response as having explicit monetary incentives in the first stage.
    Keywords: matching, team formation, performance, dynamic incentives
    JEL: C78 C91 M54
    Date: 2016–11
  2. By: Antoni Cunyat Cunyat (Universitat de València)
    Abstract: We consider a competitive labor market with moral hazard and adverse selection where firms employ teams of two workers. There exist two types of workers: selfish workers and motivated workers. Selfish workers only respond to monetary incentives. Motivated workers not only respond to monetary incentives but their behavior is also driven by intrinsic motivation. However, if a firm chooses an output-based reward system, their intrinsic motivation is undermined. We obtain that self-selection into contracts separating workers based on their motivation is feasible, provided that the crowding out e¿ect is powerful enough. More importantly, all firms have expected positive profits. Our model produces in this case heterogeneity at the firm level.
    Keywords: intrinsic motivation, adverse selection, competition
    JEL: J33 D82 D86
    Date: 2016–11
  3. By: Luca Flabbi; Mario Macis; Andrea Moro; Fabiano Schivardi
    Abstract: We investigate the effects of female executives on gender-specific wage distributions and firm performance. We find that female leadership has a positive impact at the top of the female wage distribution and a negative impact at the bottom. Moreover, the impact of female leadership on firm performance increases with the share of female workers. Our empirical strategy accounts for the endogeneity induced by the non-random assignment of executives to firms by including in the regressions firm fixed effects, by generating controls from a two-way fixed effects regression, and by building instruments based on regional trends. The empirical findings are consistent with a model of statistical discrimination where female executives are better equipped at interpreting signals of productivity from female workers. The evidence suggests substantial costs of under-representation of women at the top of the corporate hierarchy
    JEL: J7 M12 M5
    Date: 2016–12
  4. By: Julie Berry Cullen; Eric A. Hanushek; Gregory Phelan; Steven G. Rivkin
    Abstract: Firms and other organizations establish the criteria under which employees will be judged and the performance measures made available to supervisors, the board of directors and other stakeholders, and these structures almost certainly influence behavior and organization outcomes. Any divergence of the chosen performance metric from an ideal measurement of productivity may lead to suboptimal outcomes, particularly in the public sector where outside interest groups may rely more heavily on easily accessible ratings than better-informed insiders. In the case of public education, federal and state accountability systems provide considerable information about student outcomes and rate schools on that basis. However, the No Child Left Behind accountability legislation’s focus on pass rates rather than learning and achievement growth introduces the possibility that inadequate information and a flawed structure each compromise public school quality. This study of school principal labor market outcomes investigates the relationship between principal labor market success and a set of performance measures that differ on the basis of accessibility to stakeholders and link with true principal productivity. The results from the empirical analysis provide evidence that information and design deficiencies introduce a lack of alignment between incentives and principal productivity and adversely affect the quality of education in Texas public schools.
    JEL: H75 I20 I21 I28 J18 J45
    Date: 2016–12
  5. By: Brosig-Koch, Jeannette; Hennig-Schmidt, Heike; Kairies-Schwarz, Nadja; Wiesen, Daniel
    Abstract: We present causal evidence from a controlled experiment on the effect of pay for performance on physicians' behavior and patients' health benefits. At a within-subject level, we introduce performance pay to complement either fee-for-service or capitation. Performance pay is granted if a health care quality threshold is reached, and varies with the patients' severity of illness. We find that performance pay significantly reduces overprovision of medical services due to fee-for-service incentives, and underprovision due to capitation; on average, it increases the patients' health benefit. The magnitude of these effects depends, however, on the patients' characteristics. We also find evidence for a crowding-out of patient-regarding behavior due to performance pay. Health policy implications are discussed.
    Abstract: Mit Hilfe eines kontrollierten Experiments präsentieren wir kausale Evidenz zur Wirkung einer leistungsbasierten Vergütung (Pay-for-Performance) auf das Arztverhalten und den Patientennutzen. Auf individueller Ebene führen wir Pay-for-Performance entweder basierend auf einer Einzelleistungsvergütung oder einer Kopfpauschale ein. Die leistungsbasierte Vergütung, die an den Schweregrad der Erkrankung angepasst ist, wird ausgezahlt, sobald die Behandlungsqualität einen bestimmten Schwellenwert erreicht. Wir beobachten, dass Pay-for-Performance die mit der Einzelleistungsvergütung verbundene Überversorgung und die mit der Kopfpauschale verbundene Unterversorgung signifikant reduziert sowie die Patientennutzen im Durchschnitt erhöht. Die Stärke dieser Effekte variiert jedoch mit den Patientencharakteristika. Darüber hinaus finden wir Hinweise darauf, dass Pay-for-Performance Patienten-orientiertes Verhalten verdrängen kann. Implikationen für die Gesundheitspolitik werden diskutiert.
    Keywords: Fee-for-service,capitation,pay for performance,laboratory experiment,crowding-out
    JEL: C91 I11
    Date: 2016
  6. By: Susanna Gallani (Harvard Business School, Accounting and Management Unit)
    Abstract: Effective design of executive compensation contracts involves choosing and weighting performance measures, as well as defining the mix between fixed and incentive-based pay components, with a view to fostering talent retention and goal congruence. The variability in compensation design observed in practice is significantly lower than it would be predicted by contracting theory. This is likely due to indirect constraining pressures, which cannot be completely explained by industry affiliation or peer group membership. I posit that network connections involving corporate boards operate as a conduit for these pressures. Using information disclosed in proxy statements of publicly traded companies, and a vectorial approach to measure compensation similarity, I predict and find that firms that are connected by board interlocks, hiring the same compensation consulting firm, or sharing a blockholder, exhibit a higher degree of similarity in the design of executive compensation contracts than what would be predicted by similarities in organizational characteristics. The relative prominence of the connectors within the respective networks moderates the network effects on the degree of compensation similarity. Finally, I show that the market responds positively to compensation similarity, although it is associated with excess CEO compensation.
    Keywords: Compensation design, Board interlocks, Compensation consultants, Blockholders, Network centrality.
    Date: 2015–08
  7. By: HARA Hiromi
    Abstract: This study examines the gender wage gap across the wage distribution in Japan using large sample data for 1990, 2000, and 2014. The results of the Firpo-Fortin-Lemieux decomposition show that the part of the observed gender gap that is not explained by gender differences in human capital is larger at the top and at the bottom of the wage distribution, indicating that both a glass ceiling and a sticky floor exist for women in the Japanese labor market. The sticky floor could be explained by female workers being segregated into non-career track jobs, while the glass ceiling could be due to gender differences in the quality of education. Furthermore, this study also finds that while the gender wage gap has been declining from 1990 to 2014 at all quantiles of the wage distribution, the decline in gender gap of human capital attributes contributes to it. However, the glass ceiling and the sticky floor phenomena, observed since 1990, persist.
    Date: 2016–11
  8. By: Humphries, John Eric (University of Chicago); Kosse, Fabian (University of Bonn)
    Abstract: Across academic sub-fields such as labor, education, and behavioral economics, the measurement and interpretation of non-cognitive skills varies widely. As a result, it is difficult to compare results on the importance of non-cognitive skills across literatures. Drawing from these literatures, this paper systematically relates various prototypical non-cognitive measures within one data set. Specifically, we estimate and compare several different strategies for measuring non-cognitive skills. For each, we compare their relative effectiveness at predicting educational success and decompose what is being measured into underlying personality traits and economic preferences. We demonstrate that the construction of the non-cognitive factor greatly influences what is actually measured and what conclusions are reached about the role of non-cognitive skills in life outcomes such as educational attainment. Furthermore, we demonstrate that, while sometimes difficult to interpret, factors extracted from self-reported behaviors can have predictive power similar to well established taxonomies, such as the Big Five.
    Keywords: non-cognitive skills, personality, preferences, educational success
    JEL: J24 I20 D03 D90
    Date: 2016–11
  9. By: Ozili, Peterson K
    Abstract: This paper analyses the effects associated with using the magnitude of realised loan losses as a basis for performance measurement and compensation to credit risk team in banks. Paying and rewarding credit risk professionals on the basis of reporting fewer provisions or lower loan losses motivate credit risk teams to game the system that work to determine loan loss provisions estimate of banks. While bank credit risk teams are sometimes mesmerised by the short-term benefits of provisions games, they do not care if their behaviour destroys bank value and the informativeness of loan loss provisioning estimates. While it is not difficult for bank managers and analysts to understand that the provisioning process is subject to gaming, few of them understand the costs it pose on banks and how to lower this costs. This paper explains how this happens and how provisions games can be stopped or reduced. Using the magnitude of loan losses as a basis to determine the compensation to risk professionals or credit risk teams encourages provisions games. The solution is not to reduce or eliminate provisioning discretion of credit risk teams but rather to de-link credit risk teams’ bonuses from the magnitude of loan loss.
    Keywords: Provisions Games; Loan Loss Provisions; Bank Professionals, Credit Risk; Banks.
    JEL: A2 A20 E3 M4
    Date: 2017–11–30
  10. By: Dang, Thang; Dung, Thai Tri; Phuong, Vu Thi; Vinh, Tran Dinh
    Abstract: Using a panel sample of manufacturing firms from small- and medium-sized enterprise surveys between 2009 and 2013, we estimate the causal effects on firm outcomes of human resource management practices at the firm level in Vietnam. Employing a fixed-effects framework for the estimation, we find that on average a firm that provides the training for new workers gains roughly 13.7%, 10% and 14.9% higher in output value per worker, value added per worker and gross profit per worker respectively than the counterpart. Moreover, an additional ten-day training duration for new employees on average leads to 4.1% increase in output value per worker, 3.0% rise in value added per worker and 3.0% growth in gross profit per worker. We also uncover that a marginal 10% of HRM spending results in about 2% and 1.6% rises in output value per worker and value added per worker, respectively. Nevertheless, we find no statistically significant impacts of incentive measure on firm outcomes. The estimated results are strongly robust to various specifications.
    Keywords: Human resource management; firm outcomes; Vietnam
    JEL: M5
    Date: 2016–09–01

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