nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2020‒09‒07
seven papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Inputs, Incentives, and Self-selection at the Workplace By Francesco Amodio; Miguel A. Martinez-Carrasco
  2. Team Incentives, Social Cohesion, and Performance: A Natural Field Experiment By Delfgaauw, Josse; Dur, Robert; Onemu, Oke; Sol, Joeri
  3. Selection and Incentives under Time Pressure: The Importance of Framing By De Paola, Maria; Gioia, Francesca; Pupo, Valeria
  4. Employee Training and Firm Performance: Quasi-experimental evidence from the European Social Fund By Pedro S. Martins
  5. Do Non-Compete Clauses Undermine Minimum Wages? By Thomas Kohler; Fabian Schmitz
  6. Overconfidence and Gender Differences in Wage Expectations By Briel, Stephanie; Osikominu, Aderonke; Pfeifer, Gregor; Reutter, Mirjam; Satlukal, Sascha
  7. Behavioral Corporate Finance: The Life Cycle of a CEO Career By Marius Guenzel; Ulrike Malmendier

  1. By: Francesco Amodio (McGill University, CIREQ); Miguel A. Martinez-Carrasco (Universidad de Los Andes)
    Abstract: This paper studies how asymmetric information over inputs affects workers’ response to incentives and self-selection at the workplace. Using daily records from a Peruvian egg production plant, we exploit a sudden change in the worker salary structure and find that workers’ effort, firm profits, and worker participation change differentially along the two margins of input quality and worker type. Firm profits increase differentially from high productivity workers, but absenteeism and quits of these workers also differentially increase. Evidence shows that information asymmetries over inputs between workers and managers shape the response to incentives and self-selection at the workplace.
    Keywords: asymmetric information, input heterogeneity, incentives, self-selection
    JEL: D22 D24 J24 J33 M11 M52 M54 O12
    Date: 2019–12
  2. By: Delfgaauw, Josse (Erasmus University Rotterdam); Dur, Robert (Erasmus University Rotterdam); Onemu, Oke (Leiden University); Sol, Joeri (University of Amsterdam)
    Abstract: We conduct a field experiment in a Dutch retail chain of 122 stores to study the interaction between team incentives, team social cohesion, and team performance. Theory predicts that the effect of team incentives on team performance increases with the team's social cohesion, because social cohesion reduces free-riding behavior. In addition, team incentives may lead to more co-worker support or to higher peer pressure and thereby can affect the team's social cohesion. We introduce short-term team incentives in a randomly selected subset of stores and measure for all stores, both before and after the intervention, the team's sales performance, the team's social cohesion as well as co-worker support and peer pressure. The average treatment effect of the team incentive on sales is 1.5 percentage points, which does not differ significantly from zero. In line with theory, the estimated treatment effect increases with social cohesion as measured before the intervention. Social cohesion itself is not affected by the team incentives.
    Keywords: field experiment, team incentives, social cohesion, peer pressure, co-worker support, sales performance
    JEL: C93 M52
    Date: 2020–07
  3. By: De Paola, Maria (University of Calabria); Gioia, Francesca (University of Milan); Pupo, Valeria (University of Calabria)
    Abstract: In this paper we investigate whether the framing of the incentives used to foster participation into contexts characterized by high degrees of time pressure affects individuals' self-selection. At this aim we run a lab-in-the-field experiment structured in two parts. The first part investigates individual characteristics that affect performance under time pressure, while the second is devoted to analyze how the decision to work under time pressure is affected by the reward/punishment framing of incentives. We find that individuals characterized by a high degree of risk aversion perform worse under time pressure. Nonetheless, when facing a penalty incentive scheme these individuals are more likely to choose to work with strict term limits, suggesting that penalty contracts might generate adverse selection problems.
    Keywords: time pressure, bonus, penalty, incentive schemes, framing, selection, lab-in-the-field experiment
    JEL: C9 C91 D01 D91 J33
    Date: 2020–07
  4. By: Pedro S. Martins
    Abstract: As work changes, firm-provided training may become more relevant; however, there is little causal evidence about the effects of training on firms. This paper studies a large training grants programme in Portugal, contrasting successful firms that received the grants and unsuccessful firms that did not. Combining several rich data sets, we compare a large number of potential outcomes of these firms, while following them over long periods of time before and after the grant decision. Our difference-in-differences models estimate significant positive effects on take up (training hours and expenditure), with limited deadweight; and that such additional training led to increased sales, value added, employment, productivity, and exports. These effects tend to be of at least 5% and, in some cases, 10% or more, and are robust in multiple dimensions of the analysis.
    Keywords: Training subsidies, Productivity, Counterfactual evaluation.
    JEL: J24 H43 M53
    Date: 2020–06
  5. By: Thomas Kohler (Bonn Graduate School of Economics, briq); Fabian Schmitz (Bonn Graduate School of Economics, ECONtribute)
    Abstract: Many low-wage workers in the United States are subject to non-compete clauses, which forbid them to work for competitors. Empirical research has found a link between the prevalence of non-compete clauses and minimum wage legislation. To explain this link, we propose a moral hazard model with minimum wages. Non-compete clauses can be used to punish failure. We characterize the optimal contracts with and without the possibility to use a non-compete clause. We find that the principal only uses a non-compete clause if minimum wages are suciently high. Non-compete clauses transfer utility from the agent to the principal because they increase the equilibrium effort without increasing the wages. If non-compete clauses can be arbitrarily severe, there is no minimum wage for which the agent gets a rent. If non-compete clauses are bounded, both the principal and the agent might be made better off than without non-compete clauses.
    Keywords: non-compete clause, minimum wage, limited liability, moral hazard, rent extraction
    JEL: D86 J32 J41 K31
    Date: 2020–08
  6. By: Briel, Stephanie (University of Hohenheim); Osikominu, Aderonke (University of Hohenheim); Pfeifer, Gregor (University College London); Reutter, Mirjam (University of Hohenheim); Satlukal, Sascha (University of Hohenheim)
    Abstract: We analyze the impact of (over-)confidence on gender differences in expected starting salaries using elicited beliefs of prospective university students in Germany. According to our results, female students have lower wage expectations and are less overconfident than their male counterparts. Oaxaca-Blinder decompositions of the mean show that 7.7% of the gender gap in wage expectations is attributable to a higher overconfidence of males. Decompositions of the unconditional quantiles of expected salaries suggest that the contribution of gender differences in confidence to the gender gap is particularly strong at the bottom and top of the wage expectation distribution.
    Keywords: gender pay gap, wage expectations, overconfidence, decomposition analyses, unconditional quantile regressions (RIF-Regressions)
    JEL: J16 D84 D91 C21
    Date: 2020–07
  7. By: Marius Guenzel; Ulrike Malmendier
    Abstract: One of the fastest-growing areas of finance research is the study of managerial biases and their implications for firm outcomes. Since the mid-2000s, this strand of behavioral corporate finance has provided theoretical and empirical evidence on the influence of biases in the corporate realm, such as overconfidence, experience effects, and the sunk-cost fallacy. The field has been a leading force in dismantling the argument that traditional economic mechanisms— selection, learning, and market discipline—would suffice to uphold the rational-manager paradigm. Instead, the evidence reveals that behavioral forces exert a significant influence at every stage of a chief executive officer’s (CEO’s) career. First, at the appointment stage, selection does not impede the promotion of behavioral managers. Instead, competitive environments oftentimes promote their advancement, even under value-maximizing selection mechanisms. Second, while at the helm of the company, learning opportunities are limited, since many managerial decisions occur at low frequency, and their causal effects are clouded by self-attribution bias and difficult to disentangle from those of concurrent events. Third, at the dismissal stage, market discipline does not ensure the firing of biased decision-makers as board members themselves are subject to biases in their evaluation of CEOs. By documenting how biases affect even the most educated and influential decision-makers, such as CEOs, the field has generated important insights into the hard-wiring of biases. Biases do not simply stem from a lack of education, nor are they restricted to low-ability agents. Instead, biases are significant elements of human decision-making at the highest levels of organizations. An important question for future research is how to limit, in each CEO career phase, the adverse effects of managerial biases. Potential approaches include refining selection mechanisms, designing and implementing corporate repairs, and reshaping corporate governance to account not only for incentive misalignments but also for biased decision-making.
    JEL: G3 G32 G34
    Date: 2020–08

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