nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2017‒05‒21
seven papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Supervisors and Performance Management Systems By Anders Frederiksen; Lisa B. Kahn; Fabian Lange
  2. Job-related Mobility and Plant Performance in Sweden By Eriksson, Rikard; Rodríguez-Pose, Andrés
  3. Globalization and Executive Compensation By Keller, Wolfgang; Olney, Will
  4. Career Interruptions and Current Earnings: The Role of Interruption Type, Compensation Component, and Gender By Gerst, Benedikt; Grund, Christian
  5. The Role of Works Councils for Severance Payments By Grund, Christian; Martin, Johannes
  6. Are Mutual Fund Managers Paid For Investment Skill? By Markus Ibert; Ron Kaniel; Stijn Van Nieuwerburgh; Roine Vestman
  7. Satisfaction Guaranteed: When Moral Hazard meets Moral Preferences By James Andreoni

  1. By: Anders Frederiksen; Lisa B. Kahn; Fabian Lange
    Abstract: Supervisors occupy central roles in production and performance monitoring. We study how heterogeneity in performance evaluations across supervisors affects employee and supervisor careers and firm outcomes using data on the performance system of a Scandinavian service sector firm. We show that supervisors vary widely in how they rate subordinates of similar quality. To understand the nature of this heterogeneity, we propose a principal-agent model according to which supervisors can differ in their ability to elicit output from subordinates or in their taste for leniency when rating subordinates. The model also allows for variation in how informed firms are about this heterogeneity. Within the context of this model, we can discern the nature of the heterogeneity across supervisors and how informed firms are about this heterogeneity by relating observed supervisor heterogeneity in ratings to worker, supervisor, and firm outcomes. We find that subordinates are paid significantly more, and their pay is more closely aligned with performance, when they are matched to a high-rating supervisor. We also find that higher raters themselves are paid more and that the teams managed by higher raters perform better on objective performance measures. This evidence suggests that supervisor heterogeneity stems, at least in part, from real differences in managerial ability and that firms are at least partially informed about these differences. We conclude by quantifying how important heterogeneity in supervisor type is for workers' careers. For a typical worker, matching to a high rater (90th percentile) relative to a low rater (10th percentile) for just one year results in an increase in the present discounted value of earnings equivalent to 7-14% of an annual salary.
    JEL: J24 M5
    Date: 2017–04
  2. By: Eriksson, Rikard; Rodríguez-Pose, Andrés
    Abstract: This paper uses a Swedish micro-dataset containing 2,696,909 hires during the period 2002-2006 to assess the impact of job-related mobility on plant-level performance. The analysis classifies new recruits according to their work experience and level of formal qualification, as well as by the region of origin and of destination. New hires are divided into graduates and experienced workers and between high- and low-educated. The results point towards the importance of acknowledging both the experience and the skills of new recruits. The greatest benefits are related to hiring new workers from outside the region where the plant is located. The analysis also stresses the importance of geography, with plants in metropolitan regions gaining the most from labour mobility, while plants in smaller, more peripheral regions getting virtually no benefits from hiring new workers.
    Keywords: agglomeration; education; experience; labour mobility; productivity; Sweden
    JEL: J24 J62 R11
    Date: 2017–05
  3. By: Keller, Wolfgang; Olney, Will
    Abstract: This paper examines the role of globalization in the rapid increase in top incomes. Using a comprehensive data set of thousands of executives at major U.S. firms from 1993-2013, we find that exports, along with technology and firm size, have contributed to rising executive compensation. Isolating changes in exports that are unrelated to the executive's talent and actions, we show that globalization has affected executive pay not only through market channels but also through non-market channels. Furthermore, exogenous export shocks raise executive compensation mostly through bonus payments in poor-governance settings, in line with the hypothesis that globalization has enhanced the executive's rent capture opportunities. Overall, these results indicate that globalization has played a more central role in the rapid growth of executive compensation and U.S. inequality than previously thought, and that rent capture is an important part of this story.
    Keywords: corporate governance; Distributional Effects; Executive compensation; Globalization; inequality
    JEL: F14 F16 F66 J31 M12
    Date: 2017–05
  4. By: Gerst, Benedikt (RWTH Aachen University); Grund, Christian (RWTH Aachen University)
    Abstract: This study examines how career interruptions and subsequent wages of employees are related. Using individual panel data of middle managers from the German chemical sector, we are able to differentiate between different reasons for interruptions as well as between various compensation components. We show that career interruptions are more related to lower subsequent bonus payments than they are to fixed salaries and that interruptions caused by unemployment are associated with higher interruption pay gaps than those resulting from other reasons. In addition, the pay gap after career interruptions is more pronounced for male employees than it is for females.
    Keywords: career interruptions, gender pay gap, stigma effects, bonus payments, fixed salaries, total compensation
    JEL: M52 J31 J33 J71
    Date: 2017–04
  5. By: Grund, Christian (RWTH Aachen University); Martin, Johannes (RWTH Aachen University)
    Abstract: Using representative German employee data, we analyse the role of works councils for the incidence of severance payments subsequent to dismissals. While there is a positive relation with severance payments after those dismissals which stem from plant closings, the incidence of a works council is negatively associated with severance pay subsequent to individual layoffs. In both cases, we find a negative moderating effect of individuals' higher reemployment chances. We also explore gender differences and differences between the types of previously held jobs.
    Keywords: dismissals, layoffs, plant closings, severance pay, works councils
    JEL: J53 J63 J65
    Date: 2017–04
  6. By: Markus Ibert; Ron Kaniel; Stijn Van Nieuwerburgh; Roine Vestman
    Abstract: Compensation of mutual fund managers is paramount to understanding agency frictions in asset delegation. We collect a unique registry-based dataset on the compensation of Swedish mutual fund managers. We find a concave relationship between pay and revenue, in contrast to how investors compensate the fund company (firm). We also find a surprisingly weak sensitivity of pay to performance, even after accounting for the indirect effects of performance on revenue. Firm-level revenues and profits add substantial explanatory power for compensation to manager-level revenue and performance, highlighting the importance of the mutual fund firm.
    JEL: G00 G11 G2 G23 G24 J3 J31 J33 J44
    Date: 2017–04
  7. By: James Andreoni
    Abstract: Theorists and policy analysts have convincingly argued that greater trust makes a more efficient society by eliminating costly contracts or expensive reputations. Concurrently, experiments suggest that reciprocity is a potent substitute for law when compliance with contracts is imperfectly enforced. This paper examines these issues within the context of a common trust-building contract device: satisfaction guaranteed. We find that satisfaction guaranteed indeed builds trust and improves efficiency. Interestingly, sellers offering a guarantee are more trustworthy than those who don't, even when honoring it is fully voluntary, but the guarantee only elicits the trust of buyers when it has legal backing.
    JEL: C92 D02 D4 K2
    Date: 2017–04

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