nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2017‒11‒05
fourteen papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Profit Sharing and Incentives By Ozdenoren, Emre; Rubanov, Oleg
  2. Does Patient Health Behaviour respond to Doctor’s Effort? By Fichera, Eleonora; Banks, James; Siciliani, Luigi; Sutton, Matt
  3. Globalization and Executive Compensation By Wolfgang Keller; William W. Olney
  4. Dynamic Performance Evaluation with Deadlines: The Role of Commitment By Chia-Hui Chen; Junichiro Ishida
  5. Contests as Selection Mechanisms: The Impact of Risk Aversion By Christoph March; Marco Sahm
  6. Serving the Public Interest in Several Ways: Theory and Empirics By Robert Dur; Max van Lent
  7. Regulation and altruism By Izabela Jelovac; Samuel Kembou Nzale
  8. The Effects of Youth Labor Market Reforms: Evidence from Italian Apprenticeships By Andrea Albanese; Lorenzo Cappellari; Marco Leonardi
  9. Performance Pay May Not Raise Performance – A Cautionary Tale Based On Evidence from Large Scale Field Experiments in a Retail Chain By Manthei, Kathrin; Sliwka, Dirk; Vogelsang, Timo
  10. A Matter of Perspective: How Experience Shapes Preferences for Redistribution By Lea Cassar; Arnd H. Klein
  11. Sequential Round-Robin Tournaments with Multiple Prizes By Christoph Laica; Arne Lauber; Marco Sahm
  12. CONTRACT DESIGN WITH LIMITED COMMITMENT By Gretschko, Vitali; Wambach, Achim
  13. Human Resource Management in Professional Service Firms: a Systematic Literature Review By Sokolov, D.; Zavyalova, E.
  14. Whistle-Blower Protection: Theory and Experimental Evidence By Lydia Mechtenberg; Gerd Mühlheusser; Andreas Roider

  1. By: Ozdenoren, Emre; Rubanov, Oleg
    Abstract: We model a firm as a team production process subject to moral hazard and derive the optimal profit sharing scheme between productive workers and outside investors together with incentive contracts based on noisy performance signals. More productive agents with noisier performance signals are more likely to receive shares which can explain why managers are motivated by shares, and law or consulting firms form partnerships. A firm that grows by opening branches is held almost entirely by outside investors when its output noise grows faster than the number of branches. Otherwise, insiders hold substantial amount of a large firm's shares.
    Date: 2017–10
  2. By: Fichera, Eleonora; Banks, James; Siciliani, Luigi; Sutton, Matt
    Abstract: Incentive pay systems have been introduced in public sectors such as education and healthcare. Inthese organisations where the outcome (health or education) is a joint product between different agents,it is unclear what the effects of these incentives are onto the behaviour of untargeted agents. We focuson patient health as a joint product of patient effort, through lifestyle and behaviour, and doctor effort,through diagnosis and treatment. Patient response to doctor effort isa prioriambiguous and dependson the degree of complementarity or substitution between doctor and patient effort. We use data on thephysical activity, drinking and smoking behaviours of over 2,000 patients aged over 50 with cardiovasculardiseases in England. Through a new data linkage and an instrumental variable approach, we test whetherchanges in doctors’ treatment efforts triggered by changes in their payment system between 2004 and2006 had an impact on patient behaviour. Doctors working in primary care practices increased theproportion of patients with controlled disease from 76% to 83% in response to the payment change.Patients responded by reducing the frequency of drinking alcohol and their cigarette consumption. Thissuggests that patient efforts are complements to doctor effort. The results have implications for theeffectiveness of pay-for-performance schemes which encourage higher doctor effort, and the design ofsuch incentive schemes.
    Date: 2017–03–07
  3. By: Wolfgang Keller; William W. Olney
    Abstract: This paper identifies globalization as a factor behind the rapid increase in executive compensation and inequality over the last few decades. Employing comprehensive data on top executives at major U.S. companies, we show that compensation is higher at more global firms. We find that pay responds not only to firm size and technology but also to exports conditional on other firm characteristics. Export shocks that are not related to the executive’s talent and actions also increase executive compensation, indicating that globalization is influencing compensation through pay-for-non-performance. Furthermore, this effect is asymmetric, with executive compensation increasing due to positive export shocks but not decreasing due to negative shocks. Finally, export shocks primarily affect discretionary forms of compensation of more powerful executives at firms with poor corporate governance, as one would expect if globalization has enhanced 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 both higher returns to top talent and rent-capture are important parts of this story.
    Keywords: inequality, executive compensation, globalization, exports
    JEL: F16 F14 M12 J31
    Date: 2017
  4. By: Chia-Hui Chen; Junichiro Ishida
    Abstract: We consider an environment in which a principal hires an agent and evaluates his productivity over time in an ongoing relationship. The problem is embedded in a continuous-time model with both hidden action and hidden information, where the principal must induce the agent to exert effort to facilitate her learning process. The value of committing to a deadline is examined in this environment, and factors which make the deadline more profitable are identified. Our framework generates a unique recursive equilibrium structure under no commitment which can be exploited to obtain a full characterization of equilibrium. The analysis allows us to evaluate the exact value of commitment for any given set of parameters and provides insight into when it is beneficial to commit to an evaluation deadline at the outset of a relationship.
    Date: 2017–10
  5. By: Christoph March; Marco Sahm
    Abstract: We investigate how individual risk preferences affect the likelihood of selecting the more able contestant within a two-player Tullock contest. Our theoretical model yields two main predictions: First, an increase in the risk aversion of a player worsens her odds unless she already has a sufficiently large advantage. Second, if the prize money is sufficiently large, a less able but less risk averse contestant can achieve an equal or even higher probability of winning than a more able but more risk averse opponent. In a laboratory experiment we confirm both, the non-monotonic impact and the compensating effect of risk aversion on winning probabilities. Our results suggest a novel explanation for the gender gap and the optimality of limited monetary incentives in selection contests.
    Keywords: selection contest, risk aversion, competitive balance, gender gap
    JEL: C72 D72 J31 K41 M51 M52
    Date: 2017
  6. By: Robert Dur; Max van Lent
    Abstract: We develop a model where people differ in their altruistic preferences and can serve the public interest in two ways: by making donations to charity and by taking a public service job and exerting effort on the job. Our theory predicts that people who are more altruistic are more likely to take a public service job and, for a given job, make higher donations to charity. Comparing equally altruistic workers, those with a regular job make higher donations to charity than those with a public service job by a simple substitution argument. We subsequently test these predictions using the German Socio-Economic Panel Study, which contains data on self-reported altruism, sector of employment, and donations to charity for more than 7,500 workers. We find support for most of our predictions.
    Keywords: altruism, charitable donations, public service motivation, public sector employment, self-selection
    JEL: D64 H11 J45 M50
    Date: 2017
  7. By: Izabela Jelovac (Univ Lyon, CNRS, GATE L-SE UMR 5824, F-69130 Ecully, France); Samuel Kembou Nzale (Aix-Marseille Univ.(Aix-Marseille School of Economics), CNRS, EHESS and Centrale Marseille, F-13002)
    Abstract: We study optimal contracts in a regulator-agent setting with joint production, altruistic and selfish agents, and uneasy outcome measurement. Such a setting represents sectors of activities such as education and health care provision. The agents and the regulator jointly produce an outcome for which they all care to some extent that is varying from agent to agent. Some agents, the altruistic ones, care more than the regulator does while others, the selfish agents, care less. Moral hazard is present due to the agent's effort that is not contractible. Adverse selection is present too since the regulator cannot a priori distinguish between altruistic and selfish agents. Contracts consist of a simple transfer from the regulator to the agents together with the regulator's input in the joint production. We show that a screening contract is not optimal when we face both moral hazard and adverse selection.
    Keywords: altruism, moral hazard, adverse selection, regulator-agent joint production
    JEL: D64 D86
    Date: 2017
  8. By: Andrea Albanese; Lorenzo Cappellari; Marco Leonardi
    Abstract: This paper estimates the causal effects of the 2003 reform of the Italian apprenticeship contract which aimed at introducing the “dual system†in Italy by allowing on-the-job training. The reform also increased the age eligibility of the apprenticeship contract and introduced a minimum floor to apprentices’ wages. Using administrative data and balancing techniques we find that five years after hiring, the new contract improves the chances of moving to a permanent job in the same firm, yet this happens mostly in large firms. There are also sizeable long-run wage effects of the reform, well beyond the legal duration of apprenticeships, compatible with increased human capital accumulation probably due to the training provisions of the reform.
    Keywords: apprenticeship, permanent work, youth employment, covariate balancing propensity score
    JEL: J24 J41 C21
    Date: 2017
  9. By: Manthei, Kathrin; Sliwka, Dirk; Vogelsang, Timo
    Date: 2017
  10. By: Lea Cassar; Arnd H. Klein
    Abstract: We investigate in a laboratory experiment if the experience of economic failure or success shapes people’s preferences for redistribution beyond self-interest. Subjects generated a high or a low income either through a lottery or through an effort-based tournament. A sub-set of subjects could then redistribute the income of another sub-set of subjects. We find that individuals who lost the tournament (lottery) redistribute significantly more than all the other types of distributors when the inequality is generated by the tournament (lottery). The effect still holds when controlling for self-selection into different outcomes of the tournament and can be explained by in- or out-group bias and a self-serving bias in responsibility attribution. These findings have implications for public policies and for the design of compensation schemes in organizations.
    Keywords: distributive justice, experience, failure, in-group bias, self-serving bias
    JEL: D31 D63 H23 M52
    Date: 2017
  11. By: Christoph Laica; Arne Lauber; Marco Sahm
    Abstract: We examine the fairness and intensity of sequential round-robin tournaments with multiple prizes. With three symmetric players and two prizes, the tournament is completely fair if and only if the second prize is valued half of the first prize, regardless of whether matches are organized as Tullock contests or as allpay auctions. For second prizes different from half of the first prize, three-player tournaments with matches organized as Tullock contests are usually fairer than tournaments with matches organized as all-pay auctions. However, unless the second prize is very small, they are less intense in the sense that players exert less ex-ante expected aggregate effort per unit of prize money. Moreover, we specify how the relative size of the second prize influences the extent and the direction of discrimination as well as the intensity of three-player tournaments. Finally, we show that there is no prize structure for which sequential round-robin tournaments with four symmetric players are completely fair in general.
    Keywords: round-robin tournament, multiple prizes, fairness, intensity, Tullock contest, all-pay auction
    JEL: C72 D72
    Date: 2017
  12. By: Gretschko, Vitali; Wambach, Achim
    Abstract: We consider the problem of a principal who wishes to contract with a privately informed agent and is not able to commit to not renegotiating any outcome of any mechanism. We provide a general characterization of renegotiation-proof outcomes. We apply the solution to a setting with a continuous type space, private values and non-linear contracts. We find that the optimal renegotiation-proof outcomes for the principal are pooling outcomes and satisfy a “no-distortion-at-the-bottom” property.
    JEL: C72
    Date: 2017
  13. By: Sokolov, D.; Zavyalova, E.
    Abstract: Human resource management in professional service firms is one of the most important instruments for promoting sustainable competitive advantage. However, the questions of what HRM-related challenges such firms face and how they utilize HRM practices in order to address these challenges are not fully answered. Using a systematic literature review of 79 peer-reviewed journals, we attempt to contribute to answering to these questions. We analyzed the contribution of the articles by four HRM issues in PSF: "herding cats" problem, multiple commitment, autonomy and informality, and alternative incentives. As result, we identified possible gaps in the literature that could serve as the directions for future research.
    Keywords: human resource management, HRM, professional service firms, systematic literature review,
    Date: 2017
  14. By: Lydia Mechtenberg; Gerd Mühlheusser; Andreas Roider
    Abstract: Whistle-blowing by employees plays a major role in uncovering corporate fraud. Various recent laws aim at improving protection of whistle-blowers and enhancing their willingness to report. Evidence on the effectiveness of such legislation is, however, scarce. Moreover, critics have raised worries about fraudulent claims by low-productivity employees. We study these issues in a theory-guided lab experiment. Easily attainable (“belief-based†) protection indeed leads to more reports, both truthful and fraudulent. Fraudulent claims dilute prosecutors’ incentives to investigate, and thereby hamper deterrence. These effects are ameliorated under more stringent (“fact-based†) protection.
    Keywords: corporate fraud, corruption, whistle-blowing, business ethics, cheap-talk games, lab experiment
    JEL: C91 D83 D73 K42 M59
    Date: 2017

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