nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2019‒02‒04
eight papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Does Performance Pay Increase Alcohol and Drug Use? By Colin Green; John Heywood
  2. Contracting Probability Distortions By Victor H. Gonzalez-Jimenez
  3. Keep Calm and Carry On: Gender differences in Endurance By Della Giusta, Marina; Clot, Sophie; Di Girolamo, Amalia
  4. Labor specialization as a source of market frictions By Molina-Domene, Maria
  5. Employer and Employee Preferences for Worker Benefits: Evidence from a Matched Survey on the Bangladesh Informal Sector By Kumar, Krishna B.; Mahmud, Minhaj; Nataraj, Shanthi; Cho, Yoon Y.
  6. Education Spillovers within the Workplace By Bentsen, Kristian Hedeager; Munch, Jakob R.; Schaur, Georg
  7. Sickness Absence and Relative Income By Laszlo Goerke
  8. Bad Jobs By Yu Chen; Matthew Doyle; Francisco Gonzalez

  1. By: Colin Green (Department of Economics, Norwegian University of Science and Technology); John Heywood (Department of Economics, University of Wisconsin-Milwaukee)
    Abstract: Using a panel of young workers, we show cross-sectional evidence of greater alcohol and illicit drug use among those paid performance pay. Recognizing that this likely reflects worker sorting, we first control for risk and ability proxies. We then control for worker fixed effects and finally for worker-employer match fixed effects. These estimates continue to indicate that the risk of substance use increases when workers are moved to performance pay. While robustness tests examine heterogeneous responses, our evidence fits conjectures that stress and effort increase with performance pay as does the spillover coping mechanism of alcohol and drug use.
    Keywords: Performance Pay; Alcohol; Drugs; Sorting
    JEL: I12 J33
    Date: 2018–12–21
  2. By: Victor H. Gonzalez-Jimenez
    Abstract: I introduce a contract designed to take advantage of the regularity that individuals distort probabilities. With this contract, the principal could activate the probability distortions that are inherent in the agent and use these distortions to incentivize the agent to perform a relevant task. This is because in the contract, the principal could choose the probability that the agent’s compensation depends on his own performance on the task. Distortions of such probability generate higher or lower motivation toper form the task. A theoretical framework and an experiment demonstrate that the proposed contract yields higher output than a traditional contract when both contracts o?er similar monetary incentives. However, the probability speci?ed by the principal is critical to achieving this result. Small probabilities yield higher levels of performance, whereas medium or high probabilities yield no performance di?erences between the contracts. The degree to which individuals overweight small probabilities explains these ?ndings.
    JEL: C91 C92 J16 J24
    Date: 2019–01
  3. By: Della Giusta, Marina; Clot, Sophie; Di Girolamo, Amalia
    Abstract: We investigate endurance, the capacity to maintain levels of performance through internal rather than external motivation in non-rewarding tasks and over sequences of tasks, though a lab experiment. The significant driver of performance is payment scheme order for women and payment schemes for men. Both women and men respond to social cues, through increased intrinsic motivation (ambition) for women and through extrinsic motivation (competition) for men. We suggest implications for reward schemes in the workplace and for selection into executive positions.
    Keywords: gender, intrinsic motivation, endurance, monetary incentives, biased beliefs
    JEL: J16 J71 M12 M51
    Date: 2019
  4. By: Molina-Domene, Maria
    Abstract: This paper investigates why labor specialization brings additional frictions to the labor market. The intuition is that labor specialized firms rely on complementarity and firm-specific human capital, assigning high value to the worker-employer match. Consistent with employees' importance, the findings show that specialized firms preserve their workforce: these firms labor hoard and increase wages during slow-downs. Additionally, when specialized firms unexpectedly face a labor supply shock | albeit managing to decrease the wages of the remaining co-workers, they become less productive. Overall, the empirical evidence suggests that frictions introduce bilateral monopoly rents.
    Keywords: labor specialization; market frictions; division of labor; human capital
    JEL: J24 J42 J63
    Date: 2018–10
  5. By: Kumar, Krishna B. (RAND); Mahmud, Minhaj (Bangladesh Institute of Development Studies (BIDS)); Nataraj, Shanthi (RAND); Cho, Yoon Y. (World Bank)
    Abstract: Informality is ubiquitous in the labor markets of developing countries, and requiring that firms formally register, pay taxes, and provide employee benefits stipulated in labor regulations to reduce such informality is challenging. However, a matched survey on employer-employee preferences suggests that mutually beneficial job benefits exist, and that encouraging their adoption might be feasible. Carefully designed discrete choice experiments on combinations of benefits related to compensation, leave and termination policies, working conditions, and accident insurance, along with incentives for employers, reveal the relative values that workers and employers attach to each benefit. The results show that workers tend to value advance notice for job termination and accident insurance, and that employers are not averse to providing these benefits. In contrast, workers find long working hours without overtime compensation to be highly undesirable, whereas many employers are generally unwilling to provide shorter hours or overtime pay unless they face the threat of fines or are offered substantial incentives for doing so. Our findings therefore suggest that encouraging the provision of termination notice and accident insurance may be relatively easy, but that increasing compliance with legal limits on working hours and overtime compensation is likely to require increased enforcement or substantial incentives.
    Keywords: informality, worker benefits, discrete choice experiments
    JEL: J32 J81
    Date: 2019–01
  6. By: Bentsen, Kristian Hedeager (University of Copenhagen); Munch, Jakob R. (University of Copenhagen); Schaur, Georg (University of Tennessee)
    Abstract: Education policies depend in part on the presence of externalities, but very little evidence exists to confirm the existence of such externalities. In this paper we investigate if there are spillover effects from education within peer groups at the workplace. We estimate the effect of increasing the share of higher educated workers in close peer groups on wages, using a rich data source linking workers to workplaces and specific occupations. Our empirical approach accounts for the endogenous sorting of workers into peer groups and workplaces, and, at the same time avoids the reflection problem. In our main specification we find statistically significant but economically small peer effects across all occupations. The magnitude of the effect differs across length and type of education, as well as across occupations and peer group- and workplace size.
    Keywords: education externality, peer effects, match worker-firm data
    JEL: E20 J24
    Date: 2018–12
  7. By: Laszlo Goerke (Institute for Labour Law and Industrial Relations in the European Union IAAEU), Trier University)
    Abstract: We analyse labour supply and absence from work choices, assuming that individual preferences exhibit relative consumption concerns. We show that contractual hours and the length of absence periods may vary equally with the strength of positional considerations. In this case, positional concerns do not affect their difference, i.e. overall or effective working time. Moreover, the nature and intensity of relative consumption effects influence the impact of sick pay and of true illness periods on contractual work hours and absence behaviour. Consequently, the profitability of employing individuals also varies with the strength of their positional concerns.
    Keywords: absence, labour supply, positional concerns, relative consumption, sick pay
    JEL: D H I J J
    Date: 2018–12
  8. By: Yu Chen (University of Calgary); Matthew Doyle (Department of Economics, University of Waterloo); Francisco Gonzalez (Department of Economics, University of Waterloo)
    Abstract: We propose a definition of bad jobs and a competitive search model that addresses why workers seek such jobs, why employers create them and why market forces allow bad jobs to persist. The model features competitive search equilibria in which unemployed workers search for jobs that are unambiguously bad in a well defined sense. Concretely, these are jobs with suboptimal career prospects and jobs characterized by employers' underinvestment in labor. Our theory builds on the insight that when current employers can counter outside offers, potential employers who do not observe workers' productivity in their current jobs use wages as a signal of workers' willingness to switch jobs. In turn, this implies that the wage contracts that employers post in the market for unemployed workers not only direct job search but also signal career prospects. Bad jobs are a symptom of coordination failure stemming from a conflict between the signaling and allocative roles of wage contracts. Our analysis brings out potential difficulties inherent to the economics of bad jobs.
    JEL: D82 E24 J31
    Date: 2019–01

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