nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2019‒11‒11
seven papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Banker Compensation, Relative Performance, and Bank Risk By Prescott, Edward Simpson; Jarque, Arantxa
  2. Working Time Accounts and Turnover By Andrey Launov
  3. Productivity and Sectoral Allocation: The Labor Market of School Principals By Muñoz, P; Prem, M
  4. Labor Contracts, Gift-Exchange and Reference Wages: Your Gift Need Not Be Mine! By Hernán Bejarano; Brice Corgnet; Joaquín Gómez-Miñambres
  5. Effort: The Unrecognized Contributor to US Income Inequality By J. Rodrigo Fuentes; Edward E. Leamer
  6. Pay, Employment, and Dynamics of Young Firms By Babina, Tania; Ma, Wenting; Moser, Christian; Ouimet, Paige P.; Zarutskie, Rebecca
  7. Informing employees in small and medium sized firms about training: results of a randomized field experiment By van den Berg, Gerard J.; Dauth, Christine; Homrighausen, Pia; Stephan, Gesine

  1. By: Prescott, Edward Simpson (Federal Reserve Bank of Cleveland); Jarque, Arantxa (Federal Reserve Bank of Richmond)
    Abstract: A multi-agent, moral-hazard model of a bank operating under deposit insurance and limited liability is used to analyze the connection between compensation of bank employees (below CEO) and bank risk. Limited liability with deposit insurance is a force that distorts effort down. However, the need to increase compensation to risk-averse employees in order to compensate them for extra bank risk is a force that reduces this effect. Optimal contracts use relative performance and are implementable as a wage with bonuses tied to individual and firm performance. The connection between pay for performance and bank risk depends on correlation of returns. If employee returns are uncorrelated, the form of pay is irrelevant for risk. If returns are perfectly correlated, a low wage can indicate risk. Connections to compensation regulation and characteristics of organizations are discussed.
    Keywords: incentive compensation; relative performance; bank regulation;
    JEL: D82 G21 G28 J33
    Date: 2019–11–05
  2. By: Andrey Launov
    Abstract: Working time account is an organization tool that allows firms to smooth their demand for hours employed. Descriptive literature suggests that working time accounts are likely to reduce layoffs and inhibit increases in unemployment during recessions. In a model of optimal labour demand I show that working time account does not necessarily guarantee less layoffs at the firm level. These may be reduced or increased depending on whether the firm meets economic downturn with surplus or deficit of hours and on how productive the firm is. In expected terms, however, working time account reduces net job destruction at almost any level of firm's productivity. Model predictions are consistent with dynamics of aggregate turnover in Germany during the Great Recession.
    Keywords: Labour demand; working hours; working time accounts; turnover; layoff; Great Recession; Germany
    JEL: J23 J63
    Date: 2019–09
  3. By: Muñoz, P; Prem, M
    Abstract: An important question is whether differences in management can explain variation in productivity and whether different compensation schemes and selection policies can impact the allocation of managerial effectiveness. To investigate this, we measure the value-added of school principals and study their labor market outcomes in Chile, where a large subsidized private sector competes with public sector schools. Using large administrative data sets on student performance and school personnel, we document substantial variation across principals in their ability to improve students’ learning. We show that effective principals increase the retention of young and high value-added teachers, and that principal effectiveness is recognized by the school community. A theoretical model of job offers and acceptances guides our empirical inquiry into the principals’ labor market. Leveraging observational and quasi-experimental variation, we show that: (1) principals’ effectiveness is more strongly associated with wages in private schools, and (2) despite relatively rigid wages, public schools can attract better principals by improving their personnel selection process.
    Keywords: School principal, Productivity, Sectoral allocation
    JEL: J3 J8 M5 I2
    Date: 2019–11–01
  4. By: Hernán Bejarano (CIDE, Department of Economics); Brice Corgnet (Emlyon Business School); Joaquín Gómez-Miñambres (Lafayette College, Department of Economics and Economic Science Institute, Chapman University)
    Abstract: We extend Akerlof’s (1982) gift-exchange model to the case in which reference wages respond to changes in the work environment such as those related to unemployment benefits or workers’ productivity levels. Our model shows that these changes spur disagreements between workers and employers regarding the value of the reference wage. These disagreements tend to weaken the giftexchange relationship thus reducing production levels and wages. We find support for these predictions in a controlled, yet realistic, workplace environment. Our work also sheds light on several stylized facts regarding employment relationships such as the increased intensity of labor conflicts when economic conditions are unstable.
    Keywords: Gift-exchange; Incentives; Self-serving Biases; Reference-dependent Utility; Laboratory Experiments; Labor Conflicts
    JEL: C92 D23 M54
    Date: 2019
  5. By: J. Rodrigo Fuentes; Edward E. Leamer
    Abstract: This paper provides theory and evidence that worker effort has played an important role in the increase in income inequality in the United States between 1980 and 2016. The theory suggests that a worker needs to exert effort enough to pay the rental value of the physical and human capital, thus high effort and high pay for jobs operating expensive capital. With that as a foundation, we use data from the ACS surveys in 1980 and 2016 to estimate Mincer equations for six different education levels that explain wage incomes as a function of weekly hours worked and other worker features. One finding is a decline in annual income for high school graduates for all hours worked per week. We argue that the sharp decline in manufacturing jobs forces down wages of those with high school degrees who have precious few high-effort opportunities outside of manufacturing. Another finding is that incomes rose only for those with advanced degrees and with weekly hours in excess of 40. We attribute this to the natural talent needed to make a computer deliver exceptional value and to the relative ease with which long hours can be chosen when working over the Internet.
    JEL: J3 J31
    Date: 2019–11
  6. By: Babina, Tania (Columbia University); Ma, Wenting (University of Massachusetts Amherst); Moser, Christian (Federal Reserve Bank of Minneapolis); Ouimet, Paige P. (University of North Carolina at Chapel Hill); Zarutskie, Rebecca (Board of Governors of the Federal Reserve System)
    Abstract: Why do young firms pay less? Using confidential microdata from the US Census Bureau, we find lower earnings among workers at young firms. However, we argue that such measurement is likely subject to worker and firm selection. Exploiting the two-sided panel nature of the data to control for relevant dimensions of worker and firm heterogeneity, we uncover a positive and significant young-firm pay premium. Furthermore, we show that worker selection at firm birth is related to future firm dynamics, including survival and growth. We tie our empirical findings to a simple model of pay, employment, and dynamics of young firms.
    Keywords: Young-firm pay premium; Selection; Worker and firm heterogeneity; Firm dynamics; Startups
    JEL: D22 E24 J30 J31 M13
    Date: 2019–08–05
  7. By: van den Berg, Gerard J.; Dauth, Christine (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Homrighausen, Pia (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Stephan, Gesine (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "We analyze a labor market program that subsidizes skill-upgrading occupational training for workers employed in small and medium sized enterprises. The program covers a substantial share of training costs. Nonetheless, take-up has been low. In an experimental setup, we mailed 10,000 brochures to potentially eligible workers, informing them about the importance of skill-upgrading occupational training in general and about the subsidy program in particular. Using combined survey and register data, we analyze the impact of receiving the brochure on workers' knowledge of the program, on take-up of subsidized and unsubsidized training, and on job characteristics. The survey data reveal that the brochure more than doubled workers' awareness of the program. We do not find effects on program take-up or short-run labor market outcomes in the register data. However, the information treatment positively affected participation in other (unsubsidized) training among employees under 45 years." (Author's abstract, IAB-Doku) ((en))
    Keywords: Klein- und Mittelbetrieb, Weiterbildungsförderung, Subvention, arbeitsmarktpolitische Maßnahme, Projekt WeGebAU, Informationsangebot - Auswirkungen, Weiterbildungsbeteiligung, Beschäftigungseffekte, Niedrigqualifizierte, ältere Arbeitnehmer, IAB-Betriebspanel, Integrierte Erwerbsbiografien
    JEL: J24 J65

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