nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2017‒03‒05
eleven papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Signaling Cooperation By Heinz, Matthias; Schumacher, Heiner
  2. Minimum Wages and Relational Contracts By Fahn, Matthias
  3. Self-managed working time and firm performance: Microeconometric evidence By Beckmann, Michael
  4. Reciprocity and honesty in capital budgeting: Positive spill-over effects of reporting By Ostermaier, Andreas
  5. Employment and Welfare Effects of Short-Time Work in Germany By Niedermayer, Kilian; Tilly, Jan
  6. Human Capital Sorting: The ‘When’ and ‘Who’ of Sorting of Talents to Urban Regions By Ahlin, Lina; Andersson, Martin; Thulin, Per
  7. Money and Status: How Best to Incentivize Work By Pradeep Dubey; John Geanakoplos
  8. Incentive Contracting Under Ambiguity Aversion By Qi Liu; Lei Lu; Bo Sun
  9. The productivity effects of worker mobility between heterogenous firms By Wolf, Katja; Stockinger, Bastian
  10. Coming to work while sick: An economic theory of presenteeism with an application to German data By Hirsch, Boris; Lechmann, Daniel; Schnabel, Claus
  11. The Structure of Health Incentives: Evidence from a Field Experiment By Mariana Carrera; Heather Royer; Mark F. Stehr; Justin R. Sydnor

  1. By: Heinz, Matthias; Schumacher, Heiner
    Abstract: We examine what an applicant’s vita signals to potential employers about her willingness to cooperate in teams. Intensive social engagement may credibly reveal that an applicant cares about the well‐being of others and therefore is less likely to free‐ride in teamwork situations. We find that contributions in a public goods game strongly increase in a subject’s degree of social engagement as indicated on her résumé (and rated by an independent third party). Engagement in other domains, such as student or sports associations, is not positively correlated with contributions. In a prediction experiment with human resource managers from various industries, we find that managers use résumé content effectively to predict relative differences in subjects’ willingness to cooperate. Thus, young professionals signal important behavioral characteristics to potential employers through the choice of their extracurricular activities.
    JEL: C72 C92 D82
    Date: 2016
  2. By: Fahn, Matthias
    Abstract: The need to give incentives is usually absent in the literature on minimum wages. However, especially in the service sector it is important how well a job is done, and employees must be incentivized to perform accordingly. Furthermore, many aspects regarding service quality cannot be verified, which implies that relational contracts have to be used to provide incentives. The present article shows that in this case, a minimum wage increases implemented effort, i.e., realized service quality, as well as the efficiency of an employment relationship. Hence, it can be explained why productivity and service quality went up after the introduction of the British National Minimum Wage, and that this might actually have caused a more efficient labor market. Furthermore, if workers have low bargaining power, a higher minimum wage also increases firm profits and consequently employment. Therefore, the present article presents a new perspective on reasons for why minimum wages often have no or only negligible employment effects.
    JEL: C73 D21 J31
    Date: 2016
  3. By: Beckmann, Michael
    Abstract: This paper empirically examines the impact of self-managed working time (SMWT) on firm performance using panel data from German establishments. As a policy for the decentralization of decision rights, SMWT provides employees with extensive control over scheduling individual working time. From a theoretical viewpoint, SMWT has ambiguous effects on both worker productivity and wages. Based on the construction of a quasi-natural experiment and the combination of a differences-in-differences approach with propensity score matching as an identification strategy, the empirical analysis shows that up to five years after introduction, SMWT increases firm productivity by about 9% and wage costs by about 8.5%. This implies that SMWT improves both individual and firm productivity, and supplemental evidence shows that these productivity enhancements can primarily be explained by incentive effects associated with decentralization policies in general.
    JEL: M50 J81 J24
    Date: 2016
  4. By: Ostermaier, Andreas
    Abstract: Capital rationing and reporting are often combined to allocate resources in firms. Trust in managers' honest reports and distrustful control create an interesting tension. How do managers respond to this ambivalence of trust and control? We develop an analytical model to predict, first, that managers reciprocate distrust; they misreport heavily so as to sabotage profitable investments. Second, reporting reduces in turn sabotage because managers are reluctant to lie. Third, honesty spills over, in addition, to inhibit managers' reciprocity. Evidence from a laboratory experiment supports our predictions. Our study ties capital rationing and reporting to the psychological factors of reciprocity and honesty and helps us understand their effects in budgeting. From a managerial viewpoint, the value of reporting, even in combination with capital rationing, may be as interesting to see as how sabotage further exacerbates the underinvestment which is known to arise from capital rationing.
    JEL: D03 G31 M41
    Date: 2016
  5. By: Niedermayer, Kilian; Tilly, Jan
    Abstract: We study the employment and welfare effects of short-time work in Germany during the recession between 2008 and 2010. Using a unique matched employer-employee data set that contains the universe of workers and employers for the metropolitan area of Nuremberg, we document the intensive and extensive margin of short-time work. We then develop and estimate an equilibrium search model in which worker-firm matches are subject to productivity shocks that differ in expected duration. After observing the realization of productivity, a worker-firm match decides whether to work full-time, lay off the worker, or use short-time work. Employed workers accumulate human capital whereas unemployed workers’ human capital depreciates. Laid off workers can be recalled by their previous employers. We find that for every four workers on short-time work, one job was saved during the recession.
    JEL: J64 J08 J38
    Date: 2016
  6. By: Ahlin, Lina (CIRCLE); Andersson, Martin (Department of Industrial Economics); Thulin, Per (KTH Royal Institute of Technology)
    Abstract: Sorting of high-ability workers is a main source of urban-rural disparities in economic outcomes. Less is known about when such human capital sorting occurs and who it involves. Using data on 15 cohorts of university graduates in Sweden, we demonstrate significant sorting to urban regions on high school grades and education levels of parents, i.e. two attributes typically associated with latent abilities that are valued in the labor market. A large part of this sorting occurs already in the decision of where to study, because top universities are predominantly located in urban regions. Estimates from a selection model show that even after controlling for sorting prior to labor market entry, the ‘best and brightest’ are still more likely to start working in urban regions, and are also more likely to remain there over long time periods. We conclude that a) urban regions are true magnets for high-ability graduates, and that b) studies of human capital sorting need to account for selection processes to and from universities, because neglecting mobility prior to labor market entry is likely to lead to underestimation of the extent of sorting to urban regions.
    Keywords: Human capital; University graduates; Spatial sorting; Migration; Labor mobility; Ability; Geography of talent; Spatial selection
    JEL: I23 J24 J61 R12
    Date: 2017–02–23
  7. 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 and, more generally, in wage jumps for small increases in productivity. 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: 2017–02
  8. By: Qi Liu; Lei Lu; Bo Sun
    Abstract: This paper studies a principal-agent model in which the information on future firm performance is ambiguous and the agent is averse to ambiguity. We show that if firm risk is ambiguous, while stocks always induce the agent to perceive a high risk, options can induce him to perceive a low risk. As a result, options can be less costly in incentivizing the agent than stocks in the presence of ambiguity. In addition, we show that providing the agent with more incentives would induce the agent to perceive a higher risk, and there is a discontinuous jump in the compensation cost as incentives increase, which makes the principal reluctant to reset contracts frequently when underlying fundamentals change. Thus, compensation contracts exhibit an inertia property. Lastly, the model sheds some light on the use of relative performance evaluation, and provides a rationale for the puzzle of pay-for-luck in the presence of ambiguity.
    Keywords: Ambiguity ; Executive compensation ; Options ; Relative performance evaluation
    JEL: G30 J33
    Date: 2017–02
  9. By: Wolf, Katja; Stockinger, Bastian
    Abstract: Several empirical studies find that worker inflows from more productive or otherwise superior firms increase hiring firms’ productivity. We conduct a similar analysis for Germany, using a unique linked employer-employee data set, and ranking sending and hiring establishments by their median wage. We find that inflows from superior (higher-paying) establishments do not increase hiring establishments’ productivity, but inflows from inferior establishments seem to. Further analyses suggest this effect is due to positive selectivity of such inflows from their sending establishments. Our findings can be interpreted as evidence of a reallocation process by which the best employees of lower-paying establishments become hired by higher-paying establishments. This process reflects the increasingly assortative pattern of worker mobility in Germany, to which our findings suggest a micro-foundation at the establishment and worker levels.
    JEL: J62 D24 J30
    Date: 2016
  10. By: Hirsch, Boris; Lechmann, Daniel; Schnabel, Claus
    Abstract: Presenteeism, i.e. attending work while sick, is widespread and associated with significant costs. Still, economic analyses of this phenomenon are rare. In a theoretical model, we show that presenteeism arises due to differences between workers in the disutility from workplace attendance. As these differences are unobservable by employers, they set wages that incentivise sick workers to attend work. Using a large representative German data set, we test several hypotheses derived from our model. In line with our predictions, we find that stressful working conditions and bad health status are positively related to presenteeism. Better dismissal protection, captured by higher tenure, is associated with slightly fewer presenteeism days, whereas the role of productivity and skills is inconclusive.
    JEL: I19 J22 J29
    Date: 2016
  11. By: Mariana Carrera; Heather Royer; Mark F. Stehr; Justin R. Sydnor
    Abstract: The use of incentives to encourage healthy behaviors is increasingly widespread, but we have little evidence about how best to structure these programs. We explore how different incentive designs affect behavior on the extensive and intensive margins through an experiment offering incentives to employees of a Fortune 500 company to use their workplace gym. Overall the likelihood of joining the gym was not strongly affected by the incentive design. Notably, front-loading incentives to encourage initial participation was not more effective than an incentive kept constant over time. For those who were already at least occasional users of the gym, however, we find more evidence that the design of incentives matters. For this group, front-loading incentives appears to be detrimental relative to a constant incentive, but a novel design that spreads out the incentive budget by turning incentives on and off over a longer period of time is effective.
    JEL: D03 I10 J30
    Date: 2017–02

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