nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2020‒08‒31
three papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Reciprocity in Dynamic Employment Relationships By Matthias Fahn
  2. Contracting over persistent information By Wei Zhao; Claudio Mezzetti; Ludovic Renou; Tristan Tomala
  3. Who Values Human Capitalists' Human Capital? Healthcare Spending and Physician Earnings By Joshua D. Gottlieb; Maria Polyakova; Kevin Rinz; Hugh Shiplett; Victoria Udalova

  1. By: Matthias Fahn
    Abstract: This paper analyzes a dynamic relational contract for employees with reciprocal preferences. I develop a tractable model to investigate how “direct” performance-pay (promising a bonus in exchange for effort) and generous upfront wages (which activate the norm of reciprocity) interact over the course of an employee’s career. I show that firms can benefit from committing to paying non-discretionary wages in the future as this boosts their credibibility in the relational contract. The reason is that these wages have to be paid under any circumstances, whereas employees only reciprocate if the firm has kept its promises. Moreover, I demonstrate that more intense competition for workers can intensify the use of reciprocity-based incentives.
    Keywords: reciprocity, relational contracts, commitment, norms and social preferences
    JEL: C73 D21 D86 D90 D91
    Date: 2020
  2. By: Wei Zhao; Claudio Mezzetti; Ludovic Renou; Tristan Tomala
    Abstract: We consider a dynamic moral hazard problem between a principal and an agent, where the sole instrument the principal has to incentivize the agent is the disclosure of information. The principal aims at maximizing the (discounted) number of times the agent chooses a particular action, e.g., to work hard. We show that there exists an optimal contract, where the principal stops disclosing information as soon as its most preferred action is a static best reply for the agent or else continues disclosing information until the agent perfectly learns the principal's private information. If the agent perfectly learns the state, he learns it in finite time with probability one; the more patient the agent, the later he learns it.
    Date: 2020–07
  3. By: Joshua D. Gottlieb; Maria Polyakova; Kevin Rinz; Hugh Shiplett; Victoria Udalova
    Abstract: Is government guiding the invisible hand at the top of the labor market? We study this question among physicians, the most common occupation among the top one percent of income earners, and whose billings comprise one-fifth of healthcare spending. We use a novel linkage of population-wide tax records with the administrative registry of all physicians in the U.S. to study the characteristics of these high earnings, and the influence of government payments in particular. We find a major role for government on the margin, with half of direct changes to government reimbursement rates flowing directly into physicians' incomes. These policies move physicians' relative and absolute incomes more than any reasonable changes to marginal tax rates. At the same time, the overall level of physician earnings can largely be explained by labor market fundamentals of long work and training hours. Competing occupations also pay well and provide a natural lower bound for physician earnings. We conclude that government plays a major role in determining the value of physicians' human capital, but it is unrealistic to use this power to reduce healthcare spending substantially.
    Date: 2020–07

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