nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2019‒05‒27
seven papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Risk Attitudes, Sample Selection and Attrition in a Longitudinal Field Experiment By Harrison, Glenn W.; Lau, Morten I.; Yoo, Hong Il
  2. Reciprocity in dynamic employment relationships By Matthias Fahn
  3. The Impact of CEOs in the Public Sector: Evidence from the English NHS By Katharina Janke; Carol Propper; Raffaella Sadun
  4. Managerial Quality and Productivity Dynamics By Achyuta Adhvaryu; Anant Nyshadham; Jorge A. Tamayo
  5. The Economic Preferences of Cooperative Managers By Alves, Guillermo; Blanchard, Pablo; Burdín, Gabriel; Chávez, Mariana; Dean, Andres
  6. How uncertainty and ambiguity in tournaments affect gender differences in competitive behavior By Loukas Balafoutas; Matthias Sutter
  7. Simplicity Creates Inequity: Implications for Fairness, Stereotypes, and Interpretability By Jon Kleinberg; Sendhil Mullainathan

  1. By: Harrison, Glenn W.; Lau, Morten I. (Department of Economics, Copenhagen Business School); Yoo, Hong Il
    Abstract: Longitudinal experiments allow one to evaluate the temporal stability of latent preferences, but raise concerns about sample selection and attrition that may confound inferences about temporal stability. We evaluate the hypothesis of temporal stability in risk preferences using a remarkable data set that combines socio-demographic information from the Danish Civil Registry with information on risk attitudes from a longitudinal field experiment. Our experimental design builds in explicit randomization on the incentives for participation. The results show that the use of different participation incentives can affect sample response rates and help identify the effects of selection. Correcting for endogenous sample selection and panel attrition changes inferences about risk preferences in an economically and statistically significant manner. Estimates of risk preferences change with these corrections. In general we find evidence consistent with temporal stability of risk preferences when one corrects for selection and attrition. †
    Keywords: Preferences; Risk Attitudes
    JEL: D81 D90
    Date: 2019–01–02
  2. By: Matthias Fahn
    Abstract: This paper explores how a relational contract establishes a norm of reciprocity and how such a norm shapes the provision of informal incentives. Developing a model of a long-term employment relationship, I show that generous upfront wages that activate the norm of reciprocity are more important when an employee is close to retirement. In earlier stages, direct incentives promising a bonus in exchange for effort are more effective. Then, a longer remaining time horizon increases the employer’s commitment. Generally, direct and reciprocity-based incentives reinforce each other and should thus optimally be used in combination. I also show that more competition can magnify the use of reciprocity-based incentives. Moreover, with asymmetric information on the employee’s responsiveness to the norm of reciprocity, an early separation of types is generally optimal. Then, the principal might benefit from asymmetric information because a firing threat is only credible if the employee potentially is not reciprocal.
    Keywords: reciprocity, relational contracts, dynamic incentives
    JEL: C73 D21 D22 D86 D90 D91
    Date: 2019
  3. By: Katharina Janke; Carol Propper; Raffaella Sadun
    Abstract: We investigate whether top managers affect the performance of large and complex public sector organizations, using as a case study CEOs of English public hospitals (large, complex organizations with multi-million turnover). We study the extent to which CEOs are differentiated in terms of their pay, as well as a wide range of hospital production measures including inputs, intermediate operational outcomes and clinical outcomes. Pay differentials suggest that the market perceives CEOs to be differentiated. However, we find little evidence of CEOs’ impact on hospital production. These results question the effectiveness of leadership changes to improve performance in the public sector.
    JEL: H51 I11 L32 M12 M5
    Date: 2019–05
  4. By: Achyuta Adhvaryu; Anant Nyshadham; Jorge A. Tamayo
    Abstract: Which managerial skills, traits, and practices matter most for productivity? How does the observability of these features affect how appropriately they are priced into wages? Combining two years of daily, line-level production data from a large Indian garment firm with rich survey data on line managers, we find that several key dimensions of managerial quality, like attention, autonomy, and control, are important for learning-by-doing as well as for overall productivity, but are not commensurately rewarded in pay. Counterfactual simulations of our structural model show large gains from screening potential hires via psychometric measurement and training to improve managerial practices.
    JEL: D24 L2 M11 M12
    Date: 2019–05
  5. By: Alves, Guillermo (Development Bank of Latin America); Blanchard, Pablo (IECON, Universidad de la República); Burdín, Gabriel (Leeds University Business School); Chávez, Mariana (IECON, Universidad de la República); Dean, Andres (IECON, Universidad de la República)
    Abstract: A growing body of research has been investigating the role of management practices and managerial behaviour in conventional private firms and public sector organizations. However, little is known about managers' behavioural profile in noninvestor-owned firms. This paper aims to fill this gap by providing a comprehensive behavioural characterization of managers employed in cooperatives.We gathered incentive-compatible measures of risk preferences, time preferences, reciprocity, altruism, and trust from 196 Uruguayan managers (half of them employed in worker cooperatives) and 92 first-year undergraduate students. To do this, we conducted a high-stakes lab-in-the-field experiment in which participants played a series of online experimental games and made incentivised decisions. The average payoff in the experiment was approximately 2.5 times higher than the average local managerial wage in the private sector. Our key findings are that (1) the fraction of risk loving subjects is lower among co-op managers compared to conventional managers, and (2) co-op managers appear to be more altruistic than their conventional counterparts. Interestingly, we do not observe significant differences between the two groups across other preference domains, such as impatience, trust, and reciprocity.
    Keywords: risk-aversion, time preferences, altruism, reciprocity, trust, lab-in-the-field experiment, managers, cooperatives
    JEL: C90 D81 J54
    Date: 2019–05
  6. By: Loukas Balafoutas (University of Innsbruck); Matthias Sutter (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: Tournament incentives prevail in labor markets. Yet, the number of tournament winners is often unclear to competitors. While it is hard to measure how this uncertainty affects work performance and willingness to compete in the field, it can be studied in a controlled lab experiment. We present a novel experiment where subjects can compete against each other, but the number of winners is either uncertain (but with known probabilities) or ambiguous (with unknown probabilities for different numbers of winners). We compare these two conditions to a control treatment with a known number of winners. We find that ambiguity induces a significant increase in the performance of men who choose to compete, while we observe no change for women. Men also increase their willingness to enter competition in the presence of ambiguity. Overall, both effects contribute to men winning the tournament significantly more often than women under uncertainty and ambiguity. These findings suggest that management should make tournament conditions transparent and information available in order to prevent gender disparities from increasing under uncertainty and ambiguity.
    Keywords: Gender, competition, uncertainty, ambiguity, experiment
    JEL: C91 D03
    Date: 2019–05
  7. By: Jon Kleinberg; Sendhil Mullainathan
    Abstract: Algorithms are increasingly used to aid, or in some cases supplant, human decision-making, particularly for decisions that hinge on predictions. As a result, two additional features in addition to prediction quality have generated interest: (i) to facilitate human interaction and understanding with these algorithms, we desire prediction functions that are in some fashion simple or interpretable; and (ii) because they influence consequential decisions, we also want them to produce equitable allocations. We develop a formal model to explore the relationship between the demands of simplicity and equity. Although the two concepts appear to be motivated by qualitatively distinct goals, we show a fundamental inconsistency between them. Specifically, we formalize a general framework for producing simple prediction functions, and in this framework we establish two basic results. First, every simple prediction function is strictly improvable: there exists a more complex prediction function that is both strictly more efficient and also strictly more equitable. Put another way, using a simple prediction function both reduces utility for disadvantaged groups and reduces overall welfare relative to other options. Second, we show that simple prediction functions necessarily create incentives to use information about individuals' membership in a disadvantaged group—incentives that weren't present before simplification, and that work against these individuals. Thus, simplicity transforms disadvantage into bias against the disadvantaged group. Our results are not only about algorithms but about any process that produces simple models, and as such they connect to the psychology of stereotypes and to an earlier economics literature on statistical discrimination.
    JEL: C54 D8 I30 J7 K00
    Date: 2019–05

This nep-hrm issue is ©2019 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.