nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2018‒11‒05
nine papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Betrayal Aversion and the Effectiveness of Incentive Contracts By Rau, Holger; Müller, Stephan
  2. Knowing Me, Knowing You? Similarity to the CEO and Fund Managers' Investment Decisions By Jaspersen, Stefan; Limbach, Peter
  3. The causal effect of trust By Björn Bartling; Ernst Fehr; David Huffman; Nick Netzer
  4. Can Online Surveys Represent the Entire Population? By Grewenig, Elisabeth; Lergetporer, Philipp; Simon, Lisa; Werner, Katharina; Woessmann, Ludger
  5. How Wage Announcements Affect Job Search: A Field Experiment By Belot, Michèle; Kircher, Philipp; Muller, Paul
  6. Vacancy Durations and Entry Wages: Evidence from Linked Vacancy-Employer-Employee Data By Andreas Kettemann; Andreas I. Mueller; Josef Zweimüller
  7. Positive psychology: A pathway to flourish employee well-being and productivity By Grace Phan-Athiroj Henderson
  8. Firing the Wrong Workers: Financing Constraints and Labor Misallocation By Andrea Caggese; Vicente Cuñat; Daniel Metzger
  9. Analyzing the Aftermath of a Compensation Reduction By Jason Sandvik; Richard Saouma; Nathan Seegert; Christopher Stanton

  1. By: Rau, Holger; Müller, Stephan
    Abstract: In this paper we study the impact of betrayal aversion on agents' effort provision, when principals have discretion regarding agents' remuneration. We show theoretically that agents who work under a nonbinding bonus contract face a trade off in their effort choice between the likelihood and the level of betrayal. Thus, depending on which effect predominates, betrayal aversion may either undermine or underpin the effectiveness of bonus contracts to induce effort. The data of our experiment reveal a strong detrimental effect of betrayal aversion. If the principal promises to pay a bonus for sufficiently high effort, the message is ineffective when agents are characterized by a high degree of betrayal aversion. In strong contrast, employees with a low degree of betrayal aversion increase their performance by more than 50%, if they received this message. The findings in this article identify an additional hidden cost of economic incentives.
    Keywords: Betrayal Aversion,Principal Agent Problem,Experiment
    JEL: C91 D03 D81
    Date: 2018
  2. By: Jaspersen, Stefan; Limbach, Peter
    Abstract: This study provides evidence that investors’ demographic similarity to CEOs affects their investment decisions. We find that mutual fund managers overweight firms led by CEOs who resemble them in terms of age, ethnicity and gender. This finding is robust to excluding educational and local ties and is supported by variation in similarity caused by CEO departures. Investing in firms run by similar CEOs, on average, is associated with superior performance and is more pronounced when CEOs have more impact on their firms. Results suggest that demographic similarity to CEOs facilitates informed trading, implying that investors’ information production incorporates firm management.
    Keywords: CEO-investor similarity,familiarity bias,information advantages,investment decisions,mutual fund performance
    JEL: G11 G23 J10
    Date: 2018
  3. By: Björn Bartling; Ernst Fehr; David Huffman; Nick Netzer
    Abstract: Trust affects almost all human relationships – in families, organizations, markets and politics. However, identifying the conditions under which trust, defined as people's beliefs in the trustworthiness of others, has a causal effect on the efficiency of human interactions has proven to be difficult. We show experimentally and theoretically that trust indeed has a causal effect. The duration of the effect depends, however, on whether initial trust variations are supported by multiple equilibria. We study a repeated principal-agent game with multiple equilibria and document empirically that an efficient equilibrium is selected if principals believe that agents are trustworthy, while players coordinate on an inefficient equilibrium if principals believe that agents are untrustworthy. Yet, if we change the institutional environment such that there is a unique equilibrium, initial variations in trust have short-run effects only. Moreover, if we weaken contract enforcement in the latter environment, exogenous variations in trust do not even have a short-run effect. The institutional environment thus appears to be key for whether trust has causal effects and whether the effects are transient or persistent.
    Keywords: Trust, causality, equilibrium selection, belief distortions, incomplete contracts, screening, institutions
    JEL: C91 D02 D91 E02
    Date: 2018–10
  4. By: Grewenig, Elisabeth (Ifo Institute for Economic Research); Lergetporer, Philipp (Ifo Institute for Economic Research); Simon, Lisa (CESifo); Werner, Katharina (Ifo Institute for Economic Research); Woessmann, Ludger (Ifo Institute for Economic Research)
    Abstract: A general concern with the representativeness of online surveys is that they exclude the "offline" population that does not use the internet. We run a large-scale opinion survey with (1) onliners in web mode, (2) offliners in face-to-face mode, and (3) onliners in face-to-face mode. We find marked response differences between onliners and offliners in the mixed-mode setting (1 vs. 2). Response differences between onliners and offliners in the same face-to-face mode (2 vs. 3) disappear when controlling for background characteristics, indicating mode effects rather than unobserved population differences. Differences in background characteristics of onliners in the two modes (1 vs. 3) indicate that mode effects partly reflect sampling differences. In our setting, re-weighting online-survey observations appears a pragmatic solution when aiming at representativeness for the entire population.
    Keywords: online survey, representativeness, mode effects, offliner, public opinion
    JEL: C83 D91 I20
    Date: 2018–09
  5. By: Belot, Michèle (European University Institute); Kircher, Philipp (University of Edinburgh); Muller, Paul (University of Gothenburg)
    Abstract: We study how job seekers respond to wage announcements by assigning wages randomly to pairs of otherwise similar vacancies in a large number of professions. High wage vacancies attract more interest, in contrast with much of the evidence based on observational data. Some applicants only show interest in the low wage vacancy even when they were exposed to both. Both findings are core predictions of theories of directed/competitive search where workers trade off the wage with the perceived competition for the job. A calibrated model with multiple applications and on-the-job search induces magnitudes broadly in line with the empirical findings.
    Keywords: online job search, directed search, wage competition, field experiments
    JEL: J31 J63 J64 C93
    Date: 2018–09
  6. By: Andreas Kettemann; Andreas I. Mueller; Josef Zweimüller
    Abstract: This paper explores the relationship between the duration of a vacancy and the starting wage of a new job, using unusually informative data comprising detailed information on vacancies, the establishments posting the vacancies and the workers eventually filling the vacancies. We find that vacancy durations are negatively correlated with the starting wage and that this negative association is particularly strong with the establishment component of the starting wage. We also confirm previous findings that growing establishments fill their vacancies faster. To understand the relationship between establishment growth, vacancy filling and entry wages, we calibrate a model with directed search and ex-ante heterogeneous workers and firms. We find a strong tension between matching the sharp increase in vacancy filling for growing firms and the response of vacancy filling to firm-level wages. We discuss the implications of this finding as well as potential resolutions.
    JEL: E24 J31 J63
    Date: 2018–10
  7. By: Grace Phan-Athiroj Henderson (Western Sydney University)
    Abstract: The ability to work in a fast-paced and high-pressure work environment is one of the required skills set by many employers in different industries (Evolve Organic 2018; ME Bank 2018; NetYourJob 2018; NSW Government 2018; Skillforce Recruitment 2018). Some job candidates believe that they are able to cope with such work environment, but in reality, they may be easily triggered by external environment resulting in depression and severe anxiety. Organisations around the world have developed and implemented stress management and intervention programmes to reduce workplace stress; however, studies found that work-related suicide has been increasing in Australia (Reynolds 2017; Routley & Ozanne-Smith 2012), France (Waters 2015), Japan (North 2011), and China (Chan & Ngai 2010). Positive psychology focuses on how people optimise their strengths and values to flourish their life satisfaction and happiness (Lilienfeld, Lynn, Namy, Woolf, Jamieson, Haslam & Slaughter 2012). Hence, this research aims to critically review how positive psychology is used as a stress prevention and management strategy so as to improve employee well-being and productivity and ultimately work-related suicide. The research outcomes demonstrate that although there were criticisms of the positive psychology (Lazarus 2003), many studies (e.g. Lyubomirsky 2008; Seligman et al. 2005; Sergent & Monfrain 2011) found that the application of positive psychology exercises resulted in the improvements of the research participants? depressive personality styles or no improvement over time. In brief, positive psychology helps employees eliminate negative self-talk or self-critics and change themselves from being pessimistic to optimistic. It also tailors a stress prevention and management strategy to each employee by changing their mindset to effectively prevent and manage their work stress which is one of the causes of work-related suicide.
    Keywords: Positive psychology, work stress, work-related suicide, negative self-talk, stress management and prevention strategies
    JEL: I19
    Date: 2018–07
  8. By: Andrea Caggese; Vicente Cuñat; Daniel Metzger
    Abstract: Firms consider wages, current and expected productivity as well as firing and hiring costs when firing a worker. Financing constraints distort this intertemporal trade-off, leading firms to sub-optimally fire short-tenured workers with high future expected productivity. We provide empirical evidence of this distortion using matched employer-employee data from the Swedish population between 2000 and 2010. We propose a new empirical strategy that uses credit ratings to identify financing constraints and uses exchange rates and trade data to identify demand shocks. Our empirical results identify an important new misallocation effect of financial frictions that operates within firms across different types of workers.
    Keywords: labor misallocation, firing decisions, Financing constraints
    JEL: G32 J21 J24 J31
    Date: 2018–10
  9. By: Jason Sandvik; Richard Saouma; Nathan Seegert; Christopher Stanton
    Abstract: Firms rarely cut compensation, so little is known about the after-effects when compensation reductions do occur. We use commission reductions at a sales firm to estimate how work effort and turnover change. In response to an 18% decline in sales commissions, corresponding to a 7% decline in median take-home pay, we find turnover increases for the most productive workers. We detect limited effort responses. Turnover and effort responses do not differ based on workers' survey replies regarding expectations of firm fairness or future promotion. The findings indicate that adverse selection concerns on the extensive margin of retaining workers drive the empirical regularity that firms rarely reduce compensation.
    JEL: J3 J30 J41 J42
    Date: 2018–10

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