nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2020‒03‒09
eleven papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. The Dark Side of Monetary Bonuses: Theory and Experimental Evidence By Victor Gonzalez-Jimenez; Patricio S. Dalton; Charles N. Noussair
  2. The Effects of Prize Structures on Innovative Performance By Joshua Graff Zivin; Elizabeth Lyons
  3. Labor-Management Communication about Training By Kambayashi, Ryo; Kato, Takao
  4. Who Has the Time? Community College Students’ Time-Use Response to Financial Incentives By Lisa Barrow; Cecilia Elena Rouse; Amanda McFarland
  5. The innovation premium to soft skills in low-skilled occupations By Aghion, Philippe; Bergeaud, Antonin; Blundell, Richard; Griffith, Rachel
  6. Harnessing the Power of Social Incentives to Curb Shirking in Teams By Brice Corgnet; Brian C. Gunia; Roberto Hernán González
  7. Self-selection bias in a field experiment: Recruiting subjects under different payment schemes By Noemí Herranz-Zarzoso; Gerardo Sabater-Grande
  8. The motivational cost of inequality: pay gaps reduce the willingness to pursue rewards By Gesiarz, Filip; De Neve, Jan-Emmanuel; Sharot, Tali
  9. Bribing in Team Contests By Serhat Dogan; Emin Karagözoðlu; Kerim Keskin; Cagri Saglam; Emin Karagözoglu
  10. Does employee happiness have an impact on productivity? By Bellet, Clement; De Neve, Jan-Emmanuel; Ward, George
  11. Selection and moral hazard effects in healthcare By Minke Remmerswaal; Jan Boone; Rudy Douven

  1. By: Victor Gonzalez-Jimenez; Patricio S. Dalton; Charles N. Noussair
    Abstract: To incentivize workers and boost performance, firms often offer monetary bonuses for the achievement of production goals. Such bonuses appeal to two types of motivations of the worker. On the one hand, the existence of a goal, on its own, triggers an intrinsic motivation associated with the desire to not fall short of the goal. On the other hand, the money paid to achieve the goal constitutes an extrinsic motivation. This paper studies the possibility that these two effects are substitutes when workers set their own goals. We develop a theoretical model that predicts that if the worker is sufficiently loss averse and faces uncertainty about reaching a production goal, offering a monetary payment contingent on reaching such a goal is counterproductive. This is because under the presence of monetary bonuses, the loss averse worker prefers setting lower goals, which yield lower but more likely bonus payments. Lower goals, in turn, negatively affect subsequent performance. Results from a laboratory experiment corroborate this prediction. This paper highlights the limits of monetary bonuses as an effective incentive when workers are loss averse.
    JEL: J41 D90 C91 D81
    Date: 2019–12
  2. By: Joshua Graff Zivin; Elizabeth Lyons
    Abstract: Successful innovation is essential for the survival and growth of organizations but how best to incentivize innovation is poorly understood. We compare how two common incentive schemes affect innovative performance in a field experiment run in partnership with a large life sciences company. We find that a winner-takes-all compensation scheme generates significantly more novel innovation relative to a compensation scheme that offers the same total compensation, but shared across the ten best innovations. Moreover, we find that the elasticity of creativity with respect to compensation schemes is much larger for teams than individual innovators.
    JEL: J24 M54 O32
    Date: 2020–02
  3. By: Kambayashi, Ryo; Kato, Takao
    Abstract: We empirically examine the labor-management communication about the in-house training program, and its relation to the actual training policy such as off-the-job training and on-the-job training. A governmental data from Japan, Survey on Labor management Communication reveals that the institutions of labor-management communication may affect the interests of employers and employees. This effect is not always in favor of in-house training program; e.g. formal collective bargaining may crowd out the interests of workers in training, partially due to the time/effort constraint. As a matter of fact, while the active labor-management communication about training is related to the actual provision of off-the-job training, it is not to the on-the-job training. We further find the consistent evidence by exploiting the indirect proxy of training policy through the wage structure of establishments. The willingness of workers to communicate the training program is related to the long-range human resource practices such as steep wage-tenure profiles.
    Keywords: Training, Collective Bargaining, Labor-Management Communication
    JEL: M53 J53 J24
    Date: 2020–02
  4. By: Lisa Barrow (Federal Reserve Bank of Chicago; University of Chicago; Woodrow Wilson School of Public and International Affairs); Cecilia Elena Rouse (Princeton University; Harvard University; Woodrow Wilson School of Public and International Affairs; Board of Governors of the Federal Reserve System (U.S.); National Bureau of Economic Research); Amanda McFarland
    Abstract: We evaluate the effect of performance-based scholarship programs for postsecondary students on student time use and effort and whether these effects are different for students we hypothesize may be more or less responsive to incentives. To do so, we administered a time-use survey as part of a randomized experiment in which community college students in New York City were randomly assigned to be eligible for a performance-based scholarship or to a control group that was only eligible for the standard financial aid. This paper contributes to the literature by attempting to get inside the “black box” of how students respond to a monetary incentive to improve their educational attainment. We find that students eligible for a scholarship devoted more time to educational activities, increased the quality of effort toward and engagement with their studies, and allocated less time to leisure. Additional analyses suggest that students who were plausibly more myopic—place less weight on future benefits—were more responsive to the incentives, but we find no evidence that students who are arguably more time constrained were less responsive to the incentives.
    Keywords: incentives; higher education; Financial aid; educational investment
    JEL: I22 I23 J24
    Date: 2020–01–01
  5. By: Aghion, Philippe; Bergeaud, Antonin; Blundell, Richard; Griffith, Rachel
    Abstract: Matched employee-employer data from the UK are used to analyze the wage premium to working in an innovative firm. We find that firms that are more R&D intensive pay higher wages on average, and this is particularly true for workers in some low-skilled occupations. We propose a model in which a firm’s innovativeness is reflected in the degree of complementarity between workers in low-skill and highskilled occupations, and in which non-verifiable soft skills are an important determinant of the wages of workers in low-skilled occupations. The model yields additional predictions on training, tenure and outsourcing which we also find support for in data.
    Keywords: innovation; skill-based technological change; wage; complementarity
    JEL: O33 L23 J31
    Date: 2019–12
  6. By: Brice Corgnet (Emlyon Business School and Economic Science Institute, Chapman University); Brian C. Gunia (Carey Business School, Johns Hopkins University); Roberto Hernán González (Burgundy School of Business, Université Bourgogne Franche-Comté and Economic Science Institute, Chapman University)
    Abstract: We study several solutions to shirking in teams that trigger social incentives by reshaping the workplace social context. Using an experimental design, we manipulate social pressure at work by varying the type of workplace monitoring and the extent to which employees engage in social interaction. This design allows us to assess the effectiveness as well as the popularity of each solution. Despite similar effectiveness in boosting productivity across solutions, only organizational systems involving social interaction (via chat) were at least as popular as a baseline treatment. This suggests that any solution based on promoting social interaction is more likely to be embraced by workers than monitoring systems alone.
    Keywords: Social Incentives; Social Pressure; Moral Hazard in Teams; Laboratory Experiments
    JEL: C92 D23 D91 M5
    Date: 2020
  7. By: Noemí Herranz-Zarzoso (LEE and Department of Economics, Universitat Jaume I, Castellón, Spain); Gerardo Sabater-Grande (LEE and Department of Economics, Universitat Jaume I, Castellón, Spain)
    Abstract: In this paper, we examine a potential self-selection bias in different samples of subjects depending on the payment scheme offered in the recruiting process. We ran four field experiments in which students enrolled in a microeconomics course were invited to set their own goal for the final exam of the course. Subjects were informed that they could be given a monetary reward if their grade were higher than or equal to their self-chosen goal. We aim to study whether subjects’ willingness to participate depends on their expected performance under diverse announced reward criteria, like a rank-order tournament and piece-rate pay. Given that judgments about future performance are closely tied to previous performance, the midterm exam scores from the current academic course are compared between participants and non-participants in order to analyze sample-sorting effects. We find that only when a rank-order tournament is offered, either exclusively or in combination with another type of payment mechanism, are high-performing students more likely to participate in the experiment than low-performing ones.
    Keywords: self-selection bias, piece-rate, rank-order tournament
    JEL: C81 C93
    Date: 2020
  8. By: Gesiarz, Filip; De Neve, Jan-Emmanuel; Sharot, Tali
    Abstract: Factors beyond a person’s control, such as demographic characteristics at birth, often influence the availability of rewards an individual can expect for their efforts. We know surprisingly little how such pay-gaps due to random differences in opportunities impact human motivation. To test this we designed a study in which we arbitrarly varied the reward offered to each participant in a group for performing the same task. Participants then had to decide whether or not they were willing to exert effort to receive their reward. Unfairness reduced participants’ motivation to pursue rewards even when their relative position in the distribution was high, despite the decision being of no benefit to others and reducing reward for oneself. This relationship was partially mediated by participants’ feelings. In particular, large disparity was associated with greater unhappiness, which was associated with lower willingness to work – even when controlling for absolute reward and its relative value, both of which also affected decisions to pursue rewards. Our findings suggest pay-gaps can trigger psychological dynamics that hurt productivity and well-being of all involved.
    Keywords: inequality; pay-gaps; motivation; effort; affect; reward
    JEL: D31 D91 J22
    Date: 2019–11
  9. By: Serhat Dogan; Emin Karagözoðlu; Kerim Keskin; Cagri Saglam; Emin Karagözoglu
    Abstract: We study bribing in a sequential team contest with multiple pairwise battles. We allow for asymmetries in winning prizes and marginal costs of effort; and we characterize the conditions under which (i) a player in a team is offered a bribe by the owner of the other team and (ii) she accepts the bribe. We show that these conditions depend on the ratios of players’ winning prizes and marginal costs of effort: the team owner chooses to bribe the player with the most favorable winning prize to marginal cost of effort ratio, and offer a bribe that leaves her indifferent between accepting (and exerting zero effort) and not accepting (and exerting her optimal effort). In some cases, the competition between players and the negative consequences of one player receiving a bribe on the team performance can drag down equilibrium bribe to zero. We also study the impact of changes in winning prizes and marginal costs of effort on equilibrium bribing behavior.
    Keywords: bribing, contest games, pairwise battles, team contests
    JEL: C72 D73 D74
    Date: 2020
  10. By: Bellet, Clement; De Neve, Jan-Emmanuel; Ward, George
    Abstract: This article provides quasi-experimental evidence on the relationship between employee happiness and productivity in the field. We study the universe of call center sales workers at British Telecom (BT), one of the United Kingdom's largest private employers. We measure their happiness over a 6 month period using a novel weekly survey instrument, and link these reports with highly detailed administrative data on workplace behaviors and various measures of employee performance. Exploiting exogenous variation in employee happiness arising from weather shocks local to each of the 11 call centers, we document a strong causal effect of worker happiness on sales. This is driven by employees working more effectively on the intensive margin by making more calls per hour, adhering more closely to their workflow schedule, and converting more calls into sales when they are happier. In our restrictive setting, we find no effects on the extensive margin of happiness on various measures of high-frequency labor supply such as attendance and break-taking
    Keywords: happiness; productivity
    JEL: J24 M50 I31
    Date: 2020–02
  11. By: Minke Remmerswaal (CPB Netherlands Bureau for Economic Policy Analysis); Jan Boone (CPB Netherlands Bureau for Economic Policy Analysis); Rudy Douven (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: In the Netherlands, average healthcare expenditures of persons without a voluntary deductible are twice as high as average healthcare expenditures of persons with a voluntary deductible. When assessing the effects of voluntary cost-sharing in healthcare on healthcare expenditures, it is important to disentangle moral hazard from selection: are healthcare expenditures low because people pay (a bigger share of) their healthcare expenditures out-of-pocket? Or are people with higher cost-sharing levels healthier? In this study, we separate selection from moral hazard for the combined mandatory and voluntary deductible in the Netherlands. We use proprietary claims data from Dutch health insurers and exploit with a panel regression discontinuity design that we can observe healthcare expenditures before and after the deductibles kick in for 18 year olds. Our study shows that selection, not moral hazard, is the main effect explaining the difference in healthcare expenditures between persons with and without a voluntary deductible. Furthermore, we find that 18 year olds who never chose a voluntary deductible reduce their healthcare spending by 26 euros (on average) in response to a 100 euro increase in the (mandatory) deductible. However, for 18 year olds who chose a voluntary deductible (on top of the mandatory) we find that this choice does not result in a further reduction in healthcare spending.
    JEL: I11 I13 H51
    Date: 2019–03

This nep-hrm issue is ©2020 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.