nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2019‒12‒02
seven papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Productivity, Profits, and Pay: A Field Experiment Analyzing the Impacts of Compensation Systems in an Apparel Factory By Lollo, Niklas; O'Rourke, Dara
  2. Does Workplace Competition Increase Labor Supply? Evidence from a Field Experiment By Amalia R. Miller; Ragan Petrie; Carmit Segal
  3. Does Intergenerational Mobility Increase Corporate Profits? By James F. Albertus; Michael Smolyansky
  4. Executive compensation in Europe: Realized gains from stock-based pay By Patricia Kotnik; Mustafa Erdem Sakinc; Dejan Guduras
  5. Ethical values in Social Economy, Human Resource Management Practices and Sustainability By Francisco J. Rincón Roldán; Álvaro López Cabrales
  6. How do Hospitals Respond to Payment Incentives? By Gautam Gowrisankaran; Keith A. Joiner; Jianjing Lin
  7. Subsidizing Inequality: Performance Pay and Risk Selection in Medicare By Michele Fioretti; Hongming Wang

  1. By: Lollo, Niklas; O'Rourke, Dara
    Abstract: Factory worker pay in global value chains remains a contentious issue. In this paper, we evaluate a two-year field experiment in an apparel factory to analyze altered compensation systems designed to increase worker pay while supporting factory goals around productivity and profitability. Using a quasi-experimental design, with unique data on wages, hours, productivity, quality, and worker engagement, we estimate the impact of three altered compensation systems on pay, productivity, and factory profits. The compensation systems can be described as: 1) an improved productivity-based scheme, 2) a scheme that brings quality and waste reduction into the calculation; and 3) a “target wage” scheme. Overall, the treatments raised wages by 4.2-9.7% and increased productivity by 8-10% points. Management reported significant financial benefits from the experiment, including increased profits for five of six lines, and avoided costs and productivity losses due to decreased turnover. The factory workers, through focus-group interviews before, during, and after the intervention, reported improved relations with team members and managers. This study demonstrates altered factory compensation can support better factory performance and a better paid workforce, indicating a path towards advanced supply chains with improved wages.
    Date: 2019–03–11
  2. By: Amalia R. Miller (University of Virginia, IZA and NBER); Ragan Petrie (Texas A&M University, Melbourne Institute: Applied Economic and Social Research, The University of Melbourne); Carmit Segal (University of Zurich)
    Abstract: This paper develops a novel field experiment to test the implicit prediction of tournament theory that competition increases work time and can therefore contribute to the long work hours required in elite occupations. A majority of workers in the treatment without explicit financial incentives worked past the minimum time, but awarding a tournament prize increased work time and effort by over 80% and lowered costs of effort or output by over a third. Effort was similar with alternative (piece rate, low-prize tournament) bonuses. Men worked longer than women in the high-prize tournament, but for the same duration in other treatments.
    Keywords: tournaments, performance pay, long work hours, elite occupations, gender
    JEL: M52 M55 J16 J22 J33 J44 D91
    Date: 2019–11
  3. By: James F. Albertus; Michael Smolyansky
    Abstract: We find that firms located in areas with higher intergenerational mobility are more profitable. Building off the work of Chetty and Hendren (2018a and 2018b)—who provide measures of intergenerational mobility for all commuting zones (essentially, metropolitan areas) within the U.S.—we are the first to show the positive association between intergenerational mobility and corporate profitability. Our regressions compare firms in the same industry at the same point in time and fully control for time-varying state-level shocks. As such, our findings cannot be explained by either differences in industry composition across localities or by variation in state-level economic conditions; nor can our results be explained by differences in firm characteristics or by local economic conditions. Rather, we argue that our findings are best explained by intergenerational mobility influencing human capital formation. Areas with higher mobility do a better job in unlocking their residents’ innate talents, which in turn is associated with improved performance by locally headquartered firms. In essence, our results uncover a positive link between greater equality of opportunity and increased corporate profitability.
    Keywords: Intergenerational mobility ; Corporate profitability ; Human capital
    JEL: G30 G32 J24 J62 R10
    Date: 2019–11–20
  4. By: Patricia Kotnik (University of Ljubljana); Mustafa Erdem Sakinc (CEPN, Universite Paris 13); Dejan Guduras (The Academic-Industry Research Network)
    Abstract: This paper adds to the empirical evidence on the extent to which stock-based pay incentivizes and rewards European corporate executives. It shows that the actual realized gains (that is, take-home compensation) from stock-based pay of CEOs in European publicly-listed firms may be underestimated by the use of `estimated fair value` measures. The paper also documents the heterogeneity among countries in terms of the levels and components of CEO take-home pay. We base our work on a sample of 301 large, publicly-traded companies listed in the S&P Europe 350 index from 11 EU countries: Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Spain, Sweden and United Kingdom for the fiscal year 2015. Through analyzing companies` annual reports, we have hand-collected data on various elements of compensation of the company`s CEO in 2015, including the gains that executives realize from stock-based pay. We document that on average half of the total compensation of the European CEOs in our sample is stock-based, measured by actual realized gains, with large differences among countries. Although in some European countries the majority of total compensation is stock-based, the proportions are still well below those that prevail in the United States. A comparison of the realized-gains measure of CEO compensation with the data based on fair value estimates shows that the latter underestimates the relevance of stock- based pay, in the case of some countries dramatically. Our research findings add to the existing research on CEO pay and the link between pay of EU-based corporate executives and the performance of the companies that they manage. Based on our work, we argue that realized gains measures of CEO pay should be the standard for assessing the incentives and rewards of senior corporate executives in Europe. Our research is the first step in building time series of European executive compensation that will be useful for policies concerning corporate governance and economic performance.
    Keywords: Executive compensation, stock-based pay, stock options, stock awards, estimated fair value, actual realized gains, EU
    JEL: D22 D31 G35 J33 M41 M52
    Date: 2018–07
  5. By: Francisco J. Rincón Roldán (Department of Business Administration, Universidad Pablo de Olavide); Álvaro López Cabrales (Department of Business Administration, Universidad Pablo de Olavide)
    Abstract: The purpose of this study was to analyse the positive relationship between social economy entities and their sustainability. We aimed to determine whether the ethical principles and values that mark the creation or foundation of this type of entities are the ones that make them more sustainable, or if this relationship is rather governed by the different human resource management (HRM) practices carried out by each social entity. Firstly, we conducted a literature review to contextualise the current framework of social economy, determining its most significant ethical principles and values, as well as their impact on the design of HRM practices. Then, we analysed a sample of the most representative Spanish social entities, of which we highlighted the three most present ethical values in them: commitment, responsibility and respect. The analysis suggests that these three ethical values are important for planning and implementing certain HRM practices, such as: selection, training and development, and diversity management. The present work concludes with the proposal of a theoretical model and some proposals among the considered variables.
    Keywords: Ethical Values, Social Economy, Human Resource Management, Sustainability
    Date: 2019–10
  6. By: Gautam Gowrisankaran; Keith A. Joiner; Jianjing Lin
    Abstract: A literature has found that medical providers inflate bills and report more conditions given financial incentives. We evaluate whether Medicare reimbursement incentives are driven more by bill inflation or coding costs. Medicare reformed its payment mechanism for inpatient hospitalizations in 2007, increasing coding costs. We first examine whether increased extra reimbursements from reporting more diagnoses lead hospitals to report more high bill codes. We find that increases in reimbursements within narrow patient groups led to more high bill codes before 2007 but not after. Using the payment reform, we then test for costly coding by comparing hospitals that adopted electronic medical records (EMRs) to others. Adopters reported relatively more top bill codes from secondary diagnoses after the reform, exclusively for medical patients, with a negative effect for surgical patients. This is consistent with EMRs lowering coding costs for medical discharges but increasing them for surgical ones. We further use a 2008 policy where Medicare implemented financial penalties for certain hospital-acquired conditions. EMR hospitals coded relatively more of these conditions following the penalization, lowering revenues. Together, this evidence is contrary to bill inflation but consistent with costly coding. Reducing coding costs may increase inpatient Medicare costs by $1.04 billion annually.
    JEL: H51 I11 I13 O33
    Date: 2019–11
  7. By: Michele Fioretti (Département d'économie); Hongming Wang (Hitotsubashi University (HIT-U))
    Abstract: Pay-for-performance is commonly employed to improve the quality of social services contracted out to firms. We show that insurer responses to pay-for-performance can widen the inequality in accessing social services. Focusing on the U.S. Medicare Advantage market, we find that high-quality insurance contracts responded to quality-linked payments by selecting healthier enrollees with premium differences across counties. The selection is profitable because the quality rating fails to adjust for pre-existing health differences of enrollees. As a result, quality improved mostly due to selection, and the supply of high-quality insurance shifted to the healthiest counties. Revising the quality rating could prevent these unintended consequences.
    Keywords: Pay-for-Performance; Quality Bonus Payment Demonstration; Medicare Advantage; Risk Selection; Supply-Side Selection; Quality Ratings; Health Inequality
    JEL: I13 I14 L15
    Date: 2019–11

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.