nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2020‒06‒29
nine papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. The Bonding Effect of Deferred Compensation: Worker Separations from a Large Firm in Early Transition Russia By Ananyev, Mikhail; Dohmen, Thomas; Lehmann, Hartmut
  2. Monetary and Social Incentives in Multi-Tasking: The Ranking Substitution Effect By Stefan, Matthias; Huber, Jürgen; Kirchler, Michael; Sutter, Matthias; Walzl, Markus
  3. The Evolution of CEO Compensation in Venture Capital Backed Startups By Michael Ewens; Ramana Nanda; Christopher T. Stanton
  4. Redistribution with Performance Pay By Pawel Doligalski; Abdoulaye Ndiaye; Nicolas Werquin
  5. Bidding for the Better Jobs: An Experiment on Gender Differences in Competitiveness without a Real-Effort Task By Andrej Angelovski; Jordi Brandts; Werner Güth
  6. Robot Imports and Firm-Level Outcomes By Bonfiglioli, Alessandra; Crinò, Rosario; Fadinger, Harald; Gancia, Gino
  7. The Ties That Bind Us: Social Networks and Productivity in the Factory By Afridi, Farzana; Dhillon, Amrita; Sharma, Swati
  8. Moral hazard and capability By Nicolas Quérou; Antoine Soubeyran; Raphael Soubeyran
  9. Management Practices, Worker Commitment, and Workplace Representation By Addison, John T.; Teixeira, Paulino

  1. By: Ananyev, Mikhail (IZA); Dohmen, Thomas (University of Bonn and IZA); Lehmann, Hartmut (University of Bologna)
    Abstract: Deferred payments, as implicit contracts, are predicted to bind workers to firms as long as workers believe that firms adhere to these implicit contracts. We employ a unique personnel data set from a Russian manufacturing firm to investigate whether wage arrears, delayed payments of wages, induce bonding effects. We find that workers' separation rates decrease dramatically when workers experience wage arrears, providing evidence for the bonding effects of deferred compensation schemes. After workers are repaid nominal wages, but have suffered real wage losses due to unexpectedly high inflation, we observe that workers affected by wage arrears again become much more likely to separate during and after the repayment period of a second episode of wage arrears, providing evidence for the weakening of the bonding effect after the firm's reputation for adequately compensating for deferred payments has been jeopardized.
    Keywords: deferred compensation, worker turnover, wage arrears, personnel data, Russia
    JEL: J30 J63 M52 P23
    Date: 2020–06
  2. By: Stefan, Matthias (University of Innsbruck); Huber, Jürgen; Kirchler, Michael (University of Innsbruck); Sutter, Matthias (Max Planck Institute for Research on Collective Goods); Walzl, Markus (University of Innsbruck)
    Abstract: Rankings are prevalent information and incentive tools in labor markets with strong competition for talent. In a dynamic model of multi-tasking and an accompanying experiment with financial professionals, we identify hidden ranking costs when performance in one task is incentivized and ranked while another prosocial task is not: (i) a ranking influences behavior if individuals lag behind: they spend more total effort and substitute effort in the prosocial task with effort in the ranked task; (ii) those ahead in the ranking spend less total effort and lower relative effort in the ranked task. Implications for incentive schemes are discussed.
    Keywords: multi-tasking decision problem, rank incentives, framed field experiment, finance professionals
    JEL: C93 D02 D91
    Date: 2020–06
  3. By: Michael Ewens; Ramana Nanda; Christopher T. Stanton
    Abstract: We use individual-level data to shed light on the evolution of founder-CEO compensation in venture capital-backed startups. We document that having a tangible, marketable product is a fundamental milestone in CEOs' compensation contracts, marking the point at which liquid cash compensation begins to increase significantly — well before a liquidity event. “Product market fit” also coincides with key human capital in the startup becoming more replaceable, marking an apparent transition in the firm's lifecycle from ‘differentiation’ to ‘standardization’. Although substantial increases in cash compensation for founder-CEOs in response to milestones improves the certainty equivalent of attempting entrepreneurship relative to flat pay, low cash compensation in the very early years can still deter entrepreneurship for potential entrants. We characterize the types of individuals most likely to be impacted by this constraint and hence those whose ideas are unlikely to be commercialized through VC-backed entrepreneurship.
    JEL: G24 G3 G32 J24 J3
    Date: 2020–06
  4. By: Pawel Doligalski; Abdoulaye Ndiaye; Nicolas Werquin
    Abstract: Half of the jobs in the U.S. feature pay-for-performance. We study nonlinear income taxation in a model where such contracts arise in private labor markets that are constrained by moral hazard frictions. We derive novel formulas for the incidence of arbitrarily nonlinear reforms of a given tax code on both the mean of earnings and their sensitivity to performance. We show theoretically and quantitatively that, following an increase in tax progressivity, the higher performance-sensitivity caused by the crowding-out of insurance provided by firms is almost fully offset by a countervailing “performance-pay effect” driven by labor supply responses. As a result, earnings risk is hardly affected by policy. We then turn to the normative analysis of a government that levies taxes and transfers to redistribute income across workers with different levels of uninsurable productivity. We find that setting taxes without accounting for the endogeneity of private insurance is close to optimal. Thus, the common concern that standard models of taxation underestimate the cost of redistribution is, in the context of performance-based compensation, overblown.
    Keywords: tax incidence, optimal taxation, moral hazard, performance pay
    JEL: D61 D82 D86 H21 H22
    Date: 2020
  5. By: Andrej Angelovski; Jordi Brandts; Werner Güth
    Abstract: We model the competitive striving for high-level positions in firms by letting experimental participants compete in bidding for prizes of different sizes in a hierarchy. Our set-up includes both a flat hierarchy and a steep hierarchy. We mainly focus on whether men and women behave differently with respect to bidding for higher and lower positions, but also consider other possible sources of heterogeneity in behavior. On average, women bid higher than men, but not significantly so, except for the top position of the flat hierarchy. For lower positions, bids are generally close to optimal bidding whereas they are relatively lower for higher positions. Women do win the top positions significantly more often, but there are no significant gender differences in earnings, the difference between prizes and bids. Our results suggest that the strong gender differences in attitudes towards competition that were found in numerous previous studies based on competition in tournaments with real-effort tasks may be specific to that environment. An implication of our results thus is that a particular phenomenon should be studied using more than one experimental design.
    Keywords: experiments, gender differences, competition
    JEL: C91 J16
    Date: 2020–06
  6. By: Bonfiglioli, Alessandra; Crinò, Rosario; Fadinger, Harald; Gancia, Gino
    Abstract: We use French data over the period 1994-2013 to study how imports of industrial robots affect firm-level outcomes. Compared to other firms operating in the same 5-digit sector, robot importers are larger, more productive, and employ a higher share of managers and engineers. Over time, robot import occurs after periods of expansion in firm size, and is followed by improvements in efficiency and a fall in demand for labor. Guided by a simple model, we then develop various empirical strategies to identify the causal effects of robot adoption. Our results suggest that, while demand shocks generate a positive correlation between robot imports and employment, exogenous changes in automation lead to job losses. We also find that robot imports increase sales per worker and the employment share of high-skill professions, but have a weak effect on total sales. The latter result suggests that productivity gains from automation may not be entirely passed on to consumers in the form of lower prices.
    Keywords: automation; Displacement; firms; robots
    JEL: D22 J23 J24 O33
    Date: 2020–04
  7. By: Afridi, Farzana; Dhillon, Amrita; Sharma, Swati
    Abstract: We use high frequency worker level productivity data from garment manufacturing units in India to study the effects of caste-based social networks on individual and group productivity when workers are complements in the production function but wages are paid at the individual level. Using exogenous variation in production line composition for almost 35,000 worker-days, we find that a 1 percentage point increase in the share of own caste workers in the line increases daily individual productivity by about 10 percentage points. The lowest performing worker increases her effort by more than 15 percentage points when the production line has a more homogeneous caste composition. Production externalities that impose financial costs due to worker's poor performance on co-workers within her social network can explain our findings. Our results suggest that even in the absence of explicit group-based financial incentives, social networks can be leveraged to improve both worker and group productivity.
    Keywords: assembly lines; caste; India; labor productivity; Social Networks
    JEL: J15 J24 Y40 Z13
    Date: 2020–04
  8. By: Nicolas Quérou (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - CNRS - Centre National de la Recherche Scientifique - UM - Université de Montpellier - INRA - Institut National de la Recherche Agronomique - UM3 - Université Paul-Valéry - Montpellier 3 - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - UM1 - Université Montpellier 1 - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques, CNRS - Centre National de la Recherche Scientifique); Antoine Soubeyran (Aix-Marseille School of Economics [Aix-Marseille Université] - Centre de la Vieille Charité [Aix-Marseille Université] - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique); Raphael Soubeyran (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - CNRS - Centre National de la Recherche Scientifique - UM - Université de Montpellier - INRA - Institut National de la Recherche Agronomique - UM3 - Université Paul-Valéry - Montpellier 3 - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - UM1 - Université Montpellier 1 - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques)
    Abstract: We consider a moral hazard problem where the agent has limited wealth which limits his possible actions. This may be due to different reasons: the opportunity cost can be monetary, the effort provided by the agent can actually be an investment, or the agent can invest in training activities in order to improve his capability. In such cases, the lower the level of wealth is, including transfer from or to the principal, the lower the maximum effort level that can be provided. The principal and the agent are risk neutral, so that limited wealth which limits possible actions is the distortion we consider compared to the standard model. We show then that the optimal contract is, in some cases, a sharing contract and the optimal up-front transfer is a payment from the principal to the agent. Moreover, whereas incentives and aid are substitutes in the case where the agent has sufficient wealth, they are complements when the agent has limited wealth. We also show that, if the agent can consume his wealth before the contract is signed, he gets all the surplus of the relationship. We discuss the implications of our findings in a variety of settings, including payments for ecosystem services, venture capital, and a current debate on wealth and cognitive functions.
    Keywords: aid,capability,incentives,moral hazard,wealth constraint,contract
    Date: 2020–06–05
  9. By: Addison, John T. (University of South Carolina); Teixeira, Paulino (University of Coimbra)
    Abstract: Using multilevel mixed effects ordered logistic models, this paper conducts an original investigation of the new management as a technology approach for all EU nations in a framework that explicitly recognizes worker representation while incorporating the notion of affective commitment. It is reported that that low worker commitment is unlikely to be found in establishments with better management practices and that, controlling for management practices and worker representation, the hypothesis that financial and productivity performance is superior in establishments without worker representation is not rejected by the data. For establishments with worker representation, the works council-only variant is seemingly the most favorable regime for financial performance, although this does not carry over to the labor productivity outcome. On net, however, the evidence suggests that the selected management practices are likely to be favorable to performance in plants with and without formal workplace representation. Greater worker commitment is strongly associated with improved labor productivity. Moreover, in this case there is seemingly no difference between works council-only representation and no representation at all. Overall, although the results for workplace representation and the financial situation are mixed, it is the case that greater commitment trumps any negative influence of worker representation type.
    Keywords: management as a technology, human resource management, worker commitment, worker representation, labor productivity, financial performance
    JEL: D22 J53 J50 L20 M54
    Date: 2020–05

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