nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2018‒06‒18
thirteen papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Performance Pay and Enterprise Productivity: The Details Matter By Kato, Takao; Kauhanen, Antti
  2. CEO Compensation, Pay Inequality, and the Gender Diversity of Bank Board of Directors By Owen, Ann L.; Temesvary, Judit
  3. Working Time Flexibility and Parental 'Quality Time' Spent with Children By Magda, Iga; Keister, Roma
  4. Delegated Project Search By Xi Chen; Yu Chen; Xuhu Wan
  5. Agency, Firm Growth, and Managerial Turnover By Ronald W. Anderson; Cecilia Bustamante; Stéphane Guibaud; Mihail Zervos
  6. Gender equity insights 2018: Inside Australia’s gender pay gap By Rebecca Cassells; Alan S Duncan
  7. What Do Workers Want? The Shortfall in Employee Participation at the European Workplace By Addison, John T.; Teixeira, Paulino
  8. The geography of alternative work By Bäckman, Claes; Hanspal, Tobin
  9. Minimum Wages and the Gender Gap in Pay: New Evidence from the UK and Ireland By Bargain, Olivier; Doorley, Karina; Van Kerm, Philippe
  10. Push or Pull? Performance-Pay, Incentives, and Information Search By David Rietzke; Yu Chen
  11. Sales Performance and Social Preferences By Essl, Andrea; von Bieberstein, Frauke; Kosfeld, Michael; Kröll, Markus
  12. The effect of computer use on job quality: evidence from Europe By MENON, Seetha; SALVATORI, Andrea; ZWYSEN, Wouter
  13. The Gender Earnings Gap in the Gig Economy: Evidence from over a Million Rideshare Drivers By Cook, Cody; Diamond, Rebecca; Hall, Jonathan; List, John A.; Oyer, Paul

  1. By: Kato, Takao (Colgate University); Kauhanen, Antti (ETLA - The Research Institute of the Finnish Economy)
    Abstract: Much of the empirical literature on PRP (Performance Related Pay) focuses on a question of whether the firm can increase firm performance in general and enterprise productivity in particular by introducing PRP and if so, how much. However, not all PRP programs are created equal and PRP programs vary significantly in a variety of attributes. This paper provides novel and rigorous evidence on the productivity effect of varying attributes of PRP and shows that the details of PRP indeed matter. In so doing we exploit the panel nature of our Finnish Linked Employer-Employee Data on the details of PRP. We first establish that the omitted variable bias is serious, makes the cross-sectional estimates on the productivity effect of the details of PRP biased upward substantially. Relying on the fixed effect estimates that account for such bias, we find: (i) group incentive PRP is more potent in boosting enterprise productivity than individual incentive PRP; (ii) group incentive PRP with profitability as a performance measure is especially powerful in raising firm productivity; (iii) when a narrow measure (such as cost reduction) is already used, adding another narrow measure (such as quality improvement) yields no additional productivity gain; and (iv) PRP with greater Power of incentives (the share of PRP in total compensation) results in greater productivity gains, and returns to Power of incentives diminishes very slowly.
    Keywords: performance pay and productivity
    JEL: M52 J33 J24 J53 O53
    Date: 2018–05
  2. By: Owen, Ann L.; Temesvary, Judit
    Abstract: Greater gender diversity on bank board of directors is associated with higher compensation inequality because CEOs at these banks have higher base salary. This effect disappears during the financial crisis, largely due to adjustment of non-salary compensation.
    Keywords: CEO compensation; gender diversity, board of directors
    JEL: G21 G34 J33
    Date: 2018–05
  3. By: Magda, Iga (Warsaw School of Economics); Keister, Roma (Institute for Structural Research (IBS))
    Abstract: The aim of our paper is to analyse the relationship between working time flexibility and parental time devoted to children. Using data from a large panel survey of Polish households carried out in 2013 and 2014 (Determinants of Educational Decisions Household Panel Survey, UDE) we investigate whether and how various dimensions of working time flexibility affect the amount of time parents spend with their children reading, playing or teaching them new things. We account for employment status of parents, their socio-economic status and social and cultural norms they share. Our results show that employment status of parents and their working time arrangements are not statistically significant for the amount of parental 'quality time' devoted to children. We show that these are parental human and cultural capital and their values that are primary factors determining the amount of parental time investments.
    Keywords: working time flexibility, parental time investments, child care, 'quality time with children'
    JEL: J13 J22 J81
    Date: 2018–04
  4. By: Xi Chen (Nanjing University, China); Yu Chen (University of Graz, Austria); Xuhu Wan (Hong Kong University of Science and Technology, Hong Kong)
    Abstract: This paper explores a new continuous-time principal-agent problem for a firm with both moral hazard and adverse selection. Adverse selection appears at random times. The agent finds projects sequentially by exerting costly effort. Each project brings output to the firm, subject to the agent’s private shocks. These serial shocks are i.i.d and independent of the arrival time of new projects and the agent’s efforts. The shocks and efforts constitute the agent’s asymmetric information. We provide a full characterization of optimal contracts in which moral hazard effect and adverse selection effects interact. The second-best contract with moral hazard can achieve first-best efficiency, and third-best contract with the moral hazard and adverse selection can achieve second-best efficiency under pure adverse selection, if the agent is expectably rich enough. The payment is front-loaded under pure moral hazard. When moral hazard is combined with adverse selection, the payment can be backloaded or front-loaded, depending on the level of expectable wealth.
    Keywords: Dynamic Contract; Continuous Time; Moral Hazard; Adverse Selection; Project Search
    JEL: C61 D82 D86 J30
    Date: 2018–05
  5. By: Ronald W. Anderson (London School of Economics and Political Science); Cecilia Bustamante (London School of Economics and Political Science); Stéphane Guibaud (Département d'économie); Mihail Zervos (London School of Economics and Political Science (LSE))
    Abstract: We study managerial incentive provision under moral hazard in a firm subject to stochastic growth opportunities. In our model, managers are dismissed after poor performance, but also when an alternative manager is better able to grow the firm. The optimal contract may involve managerial entrenchment, such that growth opportunities are foregone after good performance. Firms with better growth prospects have higher managerial turnover and more front-loaded compensation. The use of golden parachutes is suboptimal, unless the firm needs to incentivize its managers to truthfully report the arrival of growth opportunities. By ignoring the externality of the dismissal policy onto future managers, the optimal contract may imply excessive retention.
    Keywords: Agency; Firm growth; Managerial turnover
    Date: 2018–02
  6. By: Rebecca Cassells (Bankwest Curtin Economics Centre (BCEC), Curtin University); Alan S Duncan (Bankwest Curtin Economics Centre (BCEC), Curtin University)
    Abstract: This third report in the BCEC|WGEA Gender Equity Insights series extends and strengthens the evidence base around gender pay gaps and how these have changed over time across Australian workplaces. The report uses unique data reported to the WGEA, capturing 4 million employees and over 11,000 employers in the 2016-17 reporting period. It builds on the first and second in the series, with updated calculations of gender pay gaps across occupations and industries. Importantly, it highlights the nature and impact of workplace pay equity policies and actions companies are taking to address these gaps. Encouragingly, more Australian employers than ever before are taking pay equity seriously. In the four years of WGEA reporting, employers with a formal remuneration policy or strategy increased by 10 percentage points – from 48.9% in 2013-14 to 58.5% in 2016-17. Simultaneously, the proportion of employers undertaking a pay gap analysis increased from 24.0% to 37.7% in the same period. Our findings demonstrate a strong and convincing relationship between pay gap audits within an organisation, and importantly, taking action on audit findings, in reducing gender pay gaps. We also find that pay equity actions work better in combination than in isolation. An organisational commitment to correct like-for-like pay gaps are three times as effective in reducing overall gender pay gaps when the action is combined with a commitment to report pay outcomes to the Executive or company Board. This report confirms that many Australian organisations are taking positive, discernable and significant steps towards pay equity. These results should motivate further action and change across other Australian workplaces.
    Keywords: gender equity, gender pay gap, gender segregation, progression, gender and diversity, equal pay, pay equity actions, pay gap analysis
    Date: 2018–03
  7. By: Addison, John T. (University of South Carolina); Teixeira, Paulino (University of Coimbra)
    Abstract: A shortfall in employee voice attendant upon union decline has long been forewarned. Data from the third European Company Survey is used to establish perceived shortfalls in employee involvement based on the responses of employee representatives in establishments where formal workplace employee representation is practiced. Among the main findings is that the desire for greater involvement in decision making is smaller where representation is via a works council-type apparatus rather than through the agency of a union body. Similar, albeit more pronounced marginal effects are associated with information provision, most notably where employee representatives are (a) 'satisfactorily' informed on a variety of establishment issues or (b) are asked to give their opinions/involved in joint decisions in the event of some major human resource decision. The latter results are robust to subsets of the data based on variations in trust between the parties and the perceived quality of the industrial relations climate, where there is an overwhelming desire for more participation in those circumstances in which management is adjudged uncooperative and untrustworthy. On net, it remains the case that a shortfall in employee participation is observed across all types of establishments in the sample and, by extension, it would appear to those without any workplace representation at all.
    Keywords: formal workplace employee representation, works councils, union agencies, information/consultation/participation deficits, union density, country heterogeneity, industrial relations quality
    JEL: J53 J58 J83
    Date: 2018–04
  8. By: Bäckman, Claes; Hanspal, Tobin
    Abstract: The increase in alternative working arrangements has sparked a debate over the positive impact of increased exibility against the negative impact of decreased financial security. We study the prevalence and determinants of intermediated work in order to document the relative importance of the arguments for and against this recent labor market trend. We link data on individual participation and losses from a Federal Trade Commission settlement with a Multi-Level Marketing firm with detailed county-level information. Participation is greater in middle-income areas and in areas where female labor market non-participation is higher, suggesting that flexibility offers real benefits. However, losses from MLM participation are higher in areas with lower education levels and higher income inequality, suggesting that the downsides of alternative work are particularly high in certain demographics. Our results illustrate that the advantages and disadvantages of alternative work arrangements accrue to different groups.
    Keywords: Intermediated work,Multi-level marketing,Gig-economy,Entrepreneurship,Consumer financial protection
    Date: 2018
  9. By: Bargain, Olivier (University of Bordeaux); Doorley, Karina (Economic and Social Research Institute, Dublin); Van Kerm, Philippe (LISER (CEPS/INSTEAD))
    Abstract: Women are disproportionately in low paid work compared to men so, in the absence of rationing effects on their employment, they should benefit the most from minimum wage policies. This study examines the change in the gender wage gap around the introduction of minimum wages in Ireland and the United Kingdom. Using survey data for the two countries, we develop a decomposition of the change in the gender differences in wage distributions around the date of introduction of minimum wages. We separate out 'price' effects attributed to minimum wages from 'employment composition' effects. A significant reduction of the gender gap at low wages is observed after the introduction of the minimum wage in Ireland while there is hardly any change in the UK. Counterfactual simulations show that the difference between countries may be attributed to gender differences in non-compliance with the minimum wage legislation in the UK.
    Keywords: gender wage gap, minimum wage, distribution regression
    JEL: C14 I2 J16
    Date: 2018–04
  10. By: David Rietzke (Lancaster University); Yu Chen (University of Graz, Austria)
    Abstract: We study a principal-agent model wherein the agent is better informed of the prospects of the project, and the project requires both an observable and unobservable input. We characterize the optimal contracts, and explore the trade-offs between high and low-powered incentive schemes. We discuss the implications for push and pull programs used to encourage R&D activity, but our results are relevant in other contexts.
    Keywords: Pay for Performance; Moral Hazard; Adverse Selection; Observable Action; Principal-Agent Problem
    JEL: D82 D86 O31
    Date: 2018–05
  11. By: Essl, Andrea (University of Bern); von Bieberstein, Frauke (University of Bern); Kosfeld, Michael (Goethe University Frankfurt); Kröll, Markus
    Abstract: We use an incentivized experimental game to uncover heterogeneity in otherregarding preferences among salespeople in a large Austrian retail chain. Our results show that the majority of agents take the welfare of others into account but a significant fraction reveals self-regarding behavior. Matching individual behavior in the game with firm data on sales performance shows that higher concern for others is significantly associated with higher revenue per customer. At the same time, it is also associated with fewer sales per day. Both effects offset each other, so that the overall association with total sales revenue becomes insignificant. Our findings highlight the nuanced role of self- vs. other-regarding concerns in sales contexts with important implications for management and marketing research.
    Keywords: other-regarding preferences, sales performance, experimental games
    JEL: C91 D91 M31
    Date: 2018–04
  12. By: MENON, Seetha; SALVATORI, Andrea; ZWYSEN, Wouter
    Abstract: This paper studies changes in computer use and job quality in the EU-15 between 1995 and 2015. We document that while the proportion of workers using computers has increased from 40% to more than 60% over twenty years, there remain significant differences between countries even within the same occupations. Several countries have seen a significant increase in computer use even in low-skilled occupations generally assumed to be less affected by technology. Overall, the great increase in computer use between 1995 and 2015 has coincided with a period of modest deterioration of job quality in the EU-15 as whole, as discretion declined for most occupational and educational groups while intensity increased slightly for most of them. Our OLS results that exploit variation within country-occupation cells point to a sizeable positive effect of computer use on discretion, but to small or no effect on intensity at work. Our instrumental variable estimates point to an even more benign effect of computer use on job quality. Hence, the results suggest that the (moderate) deterioration in the quality of work observed in the EU-15 between 1995 and 2015 has occurred despite the spread of computers, rather than because of them.
    Keywords: job polarisation; job quality; tasks; discretion; intensity
    JEL: J21 J23 J24 O33
    Date: 2018
  13. By: Cook, Cody (Uber Technologies, Inc); Diamond, Rebecca (Stanford University); Hall, Jonathan (Uber Technologies, Inc); List, John A. (University of Chicago); Oyer, Paul (Stanford University)
    Abstract: The growth of the "gig" economy generates worker flexibility that, some have speculated, will favor women. We explore one facet of the gig economy by examining labor supply choices and earnings among more than a million rideshare drivers on Uber in the U.S. Perhaps most surprisingly, we find that there is a roughly 7% gender earnings gap amongst drivers. The uniqueness of our data--knowing exactly the production and compensation functions--permits us to completely unpack the underlying determinants of the gender earnings gap. We find that the entire gender gap is caused by three factors: experience on the platform (learning-by-doing), preferences over where/when to work, and preferences for driving speed. This suggests that, as the gig economy grows and brings more flexibility in employment, women's relatively high opportunity cost of non-paid-work time and gender-based preference differences can perpetuate a gender earnings gap even in the absence of discrimination.
    Date: 2018–01

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