nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2018‒12‒10
eleven papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. High-Powered Performance Pay and Crowding out of Non-Monetary Motives By Huffman, David B.; Bognanno, Michael L.
  2. Which Two Heads are Better than One? Uncovering the Positive Effects of Diversity in Creative Teams By Dutcher, E. Glenn; Rodet, Cortney S.
  3. Workplace Ostracism as a Predictor of Employee Performance and Employee Turnover- Evidence from the Banking Sector By Saman Javed; Hassan Shabbir Shah; Taqadus Bashir
  4. Physicians’ incentives to adopt personalized medicine: experimental evidence By Bardey, David; Kembou Nzalé, Samuel; Ventelou, Bruno
  5. Entrepreneurial Human Capital and Firm Dynamics By Francisco Queiró
  6. Quantitative and Qualitative Approaches in Managing Human Resource Development in Enterprises By Buzko, Iryna; Dyachenko, Yuriy; Ovcharenko, Ievgen; Klius, Yuliia
  7. Gaining Experience as Principal or Agent. An Experimental Study By Giovanni Ponti; Marcello Sartarelli; Iryna Sikora; Zhukova Vita
  8. Socially Useless Jobs By Dur, Robert; van Lent, Max
  9. Bank risk-taking and misconduct By Ieva Sakalauskaite
  10. What you don't know...Can't hurt you?: A natural field experiment on relative performance feedback in higher education By Ghazala Azmat; Manuel Bagues; Antonio Cabrales; Nagore Iriberri
  11. Competing on the Holodeck: The Effect of Virtual Peers and Heterogeneity in Dynamic Tournaments By Graff, Frederik; Grund, Christian; Harbring, Christine

  1. By: Huffman, David B. (University of Pittsburgh); Bognanno, Michael L. (Temple University)
    Abstract: A previous literature cautions that paying workers for performance might crowd out non-monetary motives to work hard. Empirical evidence from the field, however, has been based on between-subjects designs that are best suited for detecting crowding out due to low-powered incentives. High-powered incentives in the workplace tend to increase output, but it is unknown whether this masks crowding out. This paper uses a within-subject experimental design and finds evidence that crowding out also extends to high-powered incentives, in a real work setting with paid workers. There is individual heterogeneity, however, with a minority of workers report crowding in of motivation. Thus, the impact of performance pay might depend on the mix of worker types.
    Keywords: intrinsic motivation, incentives, non-cognitive skills, experiment
    JEL: D03 J22 J33
    Date: 2018–10
  2. By: Dutcher, E. Glenn; Rodet, Cortney S.
    Abstract: Creative teams drive the idea-economy, yet the determinants of a team's ability to create new ideas are not universally agreed upon. Group-level diversity has gained the most traction as an explanation, where a team's performance is usually attributed to diversity over observed characteristics such as race, gender, or functional expertise. Most agree that these characteristics are not especially important, but rather serve as an indicator of diversity in experiences, which is the actual mechanism that improves team ability. We formalize and test if experientially diverse groups produce more ideas. Because group assignment to projects in the field is rarely exogenous, and experiential diversity is not measured in observational data, we use a laboratory experiment to test our proposal. We find that experientially diverse teams create more ideas and also find no additional effect for gender, racial, socioeconomic, or personality diversity. Our general finding for why diversity may be important indicates that if a correlation exists between characteristic diversity and experiential diversity, the characteristically diverse team will have a higher ability. This generalization can be used to unify divergent results from prior studies and can help explain how dissimilar corporate diversity policies could be equally successful.
    Keywords: Diversity, Creativity, Group Production, Experimental Economics
    JEL: C90 C92 J24 M50 O30 O31 O34
    Date: 2018–11–11
  3. By: Saman Javed (Bahria University, Islamabad, Pakistan); Hassan Shabbir Shah (Bahria University); Taqadus Bashir (Bahria University)
    Abstract: Workplace ostracism has been identified as a separate entity from workplace harassment. Practised through banishing the target from a social group and social interaction, workplace ostracism is probable to have negative impact on the employees. Though different from harassment, it is equally destructive when it comes to the workplace environment. It manifests itself in a number of forms not only at individual level but also at the organizational level. This paper aims to explore the effects of ostracism on employee behaviour in terms of their performance and turnover. Testing the study in the banking sector, the results suggest that ostracism adversely affects employee performance. Similarly, the former leads to high turnover trend. Statistical significance has been found in the inverse relationship between workplace ostracism and employee performance; and workplace ostracism and employee turnover. The study makes a significant contribution towards the literature on Workplace Ostracism, as it examines the effect of workplace ostracism on two of the key performance indicators i.e. Performance and Turnover. The study will also provide managers with insight on the construct of ostracism will enlighten them about the costs associated with the presence of ostracism in the workplace in terms of employee performance & employee turnover.
    Keywords: Workplace Ostracism, Employee Performance, Employee Turnover.
    JEL: D23 J24 L20
    Date: 2018–10
  4. By: Bardey, David; Kembou Nzalé, Samuel; Ventelou, Bruno
    Abstract: We study physicians’ incentives to use personalized medicine techniques, replicating the physician’s trade-offs under the option of personalized medicine information. In a laboratory experiment where prospective physicians play a dual-agent real-effort game, we vary both the information structure (free access versus paid access to personalized medicine information) and the payment scheme (pay-for-performance (P4P), capitation (CAP) and fee-for-service (FFS)) by applying a within-subject design. Our results are threefold. i) Compared to FFS and CAP, the P4P payment scheme strongly impacts the decision to adopt personalized medicine. ii) Although expected to dominate the other schemes, P4P is not always efficient in transforming free access to personalized medicine into higher quality patient care. iii) When it has to be paid for, personalized medicine is positively associated with quality, suggesting that subjects tend to make better use of information that comes at a cost. We conclude that this last result can be considered a “commitment device”. However, quantification of our results suggests that the positive impact of the commitment device observed is not strong enough to justify generalizing paid access to personalized medicine.
    Keywords: Personalized medicine; fee-for-service; capitation; pay-for-performance; physician altruism and laboratory experiment
    JEL: C91 I11
    Date: 2018–11
  5. By: Francisco Queiró (Nova School of Business and Economics)
    Abstract: This paper shows that entrepreneurial human capital is a key driver of firm dynamics using administrative panel data on the universe of firms and workers in Portugal. Firms started by more educated entrepreneurs are larger at entry and exhibit higher growth throughout the life cycle. The differences are driven by productivity, are particularly strong in the upper tail of the distribution, and do not hold for more educated workers in general. In addition, they do not appear to be driven by omitted ability or selection. Combining these findings with cross-country data to calibrate a simple model of heterogeneous firms, I find that accounting for the effect of entrepreneurial human capital on firm-level productivity increases the fraction of cross-country income differences explained by human and physical capital from 40% to 65%-76%.
    Keywords: Entrepreneurship; Human Capital; Firm Dynamics; Productivity
    JEL: I2 L2 O4
    Date: 2018–12
  6. By: Buzko, Iryna; Dyachenko, Yuriy; Ovcharenko, Ievgen; Klius, Yuliia
    Abstract: The paper proposes comparing the existing and the required level of competence of the employee as a tool for determining the qualitative and quantitative parameters of personnel training. To implement this comparison, in accordance with official requirements, the human capital required for the performance of official duties as an employee's quality, which acquires value in the process of attracting to industrial relations, is calculated. Qualitative and quantitative parameters of personnel training are determined on the basis of calculation of the difference between necessary and existing competence taking into account financial possibilities of the enterprise. According to the results of calculating the available human capital, which a certain employee owns, and comparing it with the necessary one, the content (according to the type of insufficient capital) and the amount (by difference between the existing and the required level) of training, which should bring the available human capital of the employee in accordance with the required one. Formation of the content of the training is based on the definition of individual assets of human capital, which depend on the requirements for the competence of the employee and can be changed through training.
    Keywords: human resource development, personnel training, human capital, enterprise management
    JEL: J24 M12 M5 O15
    Date: 2018
  7. By: Giovanni Ponti (Universidad de Alicante); Marcello Sartarelli (Dpto. Fundamentos del Análisis Económico); Iryna Sikora (KPMG España); Zhukova Vita (Dpto. Fundamentos del Análisis Económico)
    Abstract: We study experimentally whether decisions in a principal-agent model differ when subjects gain experience by changing roles rather being in a ¿xed role over time. In addition, we examine whether increasing principals’ pro¿t opportunities has an impact on their decisions. To this aim, we use a stylised labour market where multiple principals compete to hire teams of two agents by o¿ering wage contracts and claiming residual pro¿ts after paying agents. Players’ roles, either assigned randomly every round or ¿xed, and principals’ pro¿t opportunities, either high or low, vary in a between-subject design. We ¿nd that both changing roles and facing high pro¿t opportunities leads principals to o¿er more frequently e¿cient contracts in inducing both agents to put e¿ort and to higher payo¿s for everyone, with some complementarity between role changes and pro¿t opportunities.
    Keywords: direct-response method, experience, ¿xed role, laboratory experiment, principal-agent, pro¿t opportunities, role change, stakes size
    JEL: C91 C92 D8 J41
    Date: 2018–11
  8. By: Dur, Robert (Erasmus University Rotterdam); van Lent, Max (Leiden University)
    Abstract: It has been claimed that many workers in modern economies think that their job is socially useless, i.e. that it makes no or a negative contribution to society. However, the evidence so far is mainly anecdotal. We use a representative dataset comprising 100,000 workers from 47 countries at four points in time. We find that approximately 8% of workers perceive their job as socially useless, while another 17% are doubtful about the usefulness of their job. There are sizeable differences between countries, sectors, occupations, and age groups, but no trend over time. A vast majority of workers cares about holding a socially useful job and we find that they suffer when they consider their job useless. We also explore possible causes of socially useless jobs, including bad management, strict job protection legislation, harmful economic activities, labor hoarding, and division of labor.
    Keywords: sin industries, job protection legislation, management quality, job search, job satisfaction, work motivation, labor hoarding, division of labor
    JEL: J2 J3 J4 J8 M5
    Date: 2018–10
  9. By: Ieva Sakalauskaite (University of Amsterdam)
    Abstract: This paper studies bank misconduct using a novel dataset on malpractice that resulted in conduct costs in a sample of 30 financial institutions during 2000-2016. It shows that misconduct has been prevalent over the sample period and that its intensity varies over the business cycle. Furthermore, the initiation of misconduct is related to bank remuneration schemes, increasing with CEO bonuses in periods of high economic growth and when bank leverage is high. To provide a possible explanation for the observed dynamics, the paper builds a theoretical model in which misconduct is linked to bank risk-taking. There, the implementation of profitable but risky projects requires more aggressive pay structures, in turn increasing managers’ incentives to engage in other activities that boost short-term returns. The findings have implications for regulation aimed at preventing malpractice in financial institutions.
    Keywords: Banks, Misconduct, Bonuses, Supervision
    JEL: G21 G28
    Date: 2018–11–19
  10. By: Ghazala Azmat (Département d'économie); Manuel Bagues (Aalto University); Antonio Cabrales (University College of London (UCL)); Nagore Iriberri (University of the Basque Country (EHU))
    Abstract: This paper studies the effect of providing feedback to college students on their position in the grade distribution by using a natural field experiment. This information was updated every six months during a three-year period. We find that greater grades transparency decreases educational performance, as measured by the number of exams passed and GPA. However self-reported satisfaction, as measured by surveys conducted after feedback is provided but before students take their exams, increases. We provide a theoretical framework to understand these results, focusing on the role of prior beliefs, and using out-of-trial surveys to test the model. In the absence of treatment, a majority of students underestimate their position in the grade distribution, suggesting that the updated information is “good news” for many students. Moreover, the negative effect on performance is driven by those students who underestimate their position in the absence of feedback. Students who overestimate initially their position, if anything, respond positively. The performance effects are short lived - by the time students graduate, they have similar accumulated GPA and graduation rates.
    Keywords: Relative performance feedback; Ranking; Natural field experiment; School performance
    Date: 2018
  11. By: Graff, Frederik (RWTH Aachen University); Grund, Christian (RWTH Aachen University); Harbring, Christine (RWTH Aachen University)
    Abstract: We propose experiments in virtual reality (VR) as a new approach to examining behavior in an economic context, e.g., heterogeneity in dynamic tournaments. We simulate a realistic working situation in a highly immersive environment. Implementing a tournament in VR, we are able to mitigate the reflection problem, which usually undermines research on dynamic interaction. Moreover, VR allows us to ceteris paribus control for the performance of the virtual peer (humanoid avatar), and thus to get an understanding of the reaction of the subject to the avatar in a really dynamic setting, as the subject is constantly able to observe the avatar's performance. Based on a first experimental phase, we match our subjects with an avatar yielding a specific output. We observe that the subjects' performance is highest in a homogeneous tournament, i.e., when they compete against an avatar achieving the same output as they did in the preceding phase. Interestingly, these results are particularly driven by peer effects rather than by tournament incentives. We extensively track the behavior of subjects and the particular situation and, e.g., examine the role of intermediate score differences and the degree of the subjects' movements.
    Keywords: reflection problem, tournament, peer effects, real effort, virtual reality, avatar, heterogeneity
    JEL: C91 D9 J33 M52
    Date: 2018–10

This nep-hrm issue is ©2018 by Patrick Kampkötter. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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