nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2021‒03‒01
twelve papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Promotions and Productivity: The Role of Meritocracy and Pay Progression in the Public Sector By Erika Deserranno; Philipp Kastrau; Gianmarco León-Ciliotta
  2. Interactions between social norms and incentive mechanisms in organizations By Ravshanbek Khodzhimatov; Stephan Leitner; Friederike Wall
  3. Recruitment, effort, and retention effects of performance contracts for civil servants: Experimental evidence from Rwandan primary schools By Clare Leaver; Owen Ozier; Pieter Serneels; Andrew Zeitlin
  4. Reservation Wages and Workers’ Valuation of Job Flexibility: Evidence from a Natural Field Experiment By Kuan-Ming Chen; Ning Ding; John A. List; Magne Mogstad
  5. Adverse Effects of Monitoring: Evidence from a field experiment By Herz, Holger; Zihlmann, Christian
  6. Does Working with a Future Executive Make Junior Employees More Likely to Be Promoted ? By Arai, Natsuki; Nakazawa, Nobuhiko
  7. Do Financial Concerns Make Workers Less Productive? By Supreet Kaur; Sendhil Mullainathan; Suanna Oh; Frank Schilbach
  8. Does gender affect medical decisions? Results from a behavioral experiment with physicians and medical students By Godager, Geir; Hennig-Schmidt, Heike; Li, Jing Jing; Wang, Jian; Yang, Fan
  9. Quality of Management of Firms in Turkey By Del Carpio, Ximena; Taskin, Temel
  10. Discrimination, Manager, and Firm Performance: Evidence from "Aryanizations" in Nazi Germany By Kilian Huber; Volker Lindenthal; Fabian Waldinger
  11. Worker well-being before and during the COVID-19 restrictions: A longitudinal study in the UK By Diane Pelly; Michael Daly; Liam Delaney; Orla Doyle
  12. CEO behavior and firm performance By Bandiera, Oriana; Prat, Andrea; Hansen, Stephen; Sadun, Raffaella

  1. By: Erika Deserranno; Philipp Kastrau; Gianmarco León-Ciliotta
    Abstract: We study promotion incentives in the public sector by means of a field experiment with the Ministry of Health in Sierra Leone. The experiment creates exogenous variation in meritocracy by linking promotions to performance and variation in perceived pay progression among the lowest tier of health workers. We find that meritocratic promotions lead to higher productivity, and more so when workers expect a steep pay increase. However, when promotions are not meritocratic, increasing the pay gradient reduces productivity through negative morale effects. The findings highlight the importance of taking into account the interactions between different tools of personnel policy.
    Keywords: promotions, meritocracy, pay progression, worker productivity
    JEL: M51 M52 J31 D73
    Date: 2021–02
  2. By: Ravshanbek Khodzhimatov; Stephan Leitner; Friederike Wall
    Abstract: We focus on how individual behavior that complies with social norms interferes with performance-based incentive mechanisms in organizations with multiple distributed decision-making agents. We model social norms to emerge from interactions between agents: agents observe other the agents' actions and, from these observations, induce what kind of behavior is socially acceptable. By complying with the induced socially accepted behavior, agents experience utility. Also, agents get utility from a pay-for-performance incentive mechanism. Thus, agents pursue two objectives. We place the interaction between social norms and performance-based incentive mechanisms in the complex environment of an organization with distributed decision-makers, in which a set of interdependent tasks is allocated to multiple agents. The results suggest that, unless the sets of assigned tasks are highly correlated, complying with emergent socially accepted behavior is detrimental to the organization's performance. However, we find that incentive schemes can help offset the performance loss by applying individual-based incentives in environments with lower task-complexity and team-based incentives in environments with higher task-complexity.
    Date: 2021–02
  3. By: Clare Leaver (Blavatnik School of Government University College); Owen Ozier (Williams College); Pieter Serneels (University of East Anglia); Andrew Zeitlin (Georgetown University)
    Abstract: This paper reports on a two-tiered experiment designed to separately identify the selection and effort margins of pay-for-performance (P4P). At the recruitment stage, teacher labor markets were randomly assigned to a pay-for-percentile or fixed-wage contract. Once recruits were placed, an unexpected, incentive compatible, school-level re-randomization was performed, so that some teachers who applied for a fixed-wage contract ended up being paid by P4P, and vice versa. By the second year of the study, the within-year effort effect of P4P was 0.16 standard deviations of pupil learning, with the total effect rising to 0.20 standard deviations after allowing for selection.
    Keywords: pay-for-performance, selection, incentives, teachers, field experiment
    JEL: C93 I21 J45 M52 O15
    Date: 2021–01–27
  4. By: Kuan-Ming Chen (University of Chicago - Department of Economics); Ning Ding (University of Chicago - Department of Economics); John A. List (University of Chicago - Department of Economics; NBER; IZA Institute of Labor Economics); Magne Mogstad (University of Chicago - Department of Economics; Statistics Norway; IFS; NBER)
    Abstract: Recent changes in labor arrangements have increased interest in estimating and understanding the value of job flexibility. We leverage a large natural ï¬ eld experiment at Uber to create exogenous variation in expected market wages across individuals and over time. Combining this experiment with high frequency panel data on wages and individual work decisions, we document how labor supply responds to exogenous changes in expected market wages in a setting with virtually no restrictions on driver labor allocation. We find that there is i) systematic heterogeneity in labor supply responses both across drivers and within a driver over time, ii) significant fixed costs of beginning a shift, and iii) high rider demand when it is costly for drivers to work. These three findings motivate a model of labor supply with heterogenous preferences over work schedules, adjustment costs, and statistical dependence between market wages and the costs of driving. We recover the labor supply elasticities and reservation wages of this dynamic labor supply model via a combination of experimental estimates and other data moments. We then perform counterfactual analyses that allow us to examine how preference heterogeneity and adjustment costs influence the responses of workers’ to wage incentives as well as infer drivers’ willingness to pay for the ability to customize and adjust their work schedule. We also show that a static approach to the driver’s dynamic problem delivers materially different estimates of workers’ labor supply elasticities and their value of job flexibility.
    Keywords: Adjustment costs, dynamic model of labor supply, job flexibility, labor supply elasticities, reservation wages, value of time
    Date: 2020
  5. By: Herz, Holger; Zihlmann, Christian
    Abstract: We conduct a field experiment with remote workers to assess potential adverse effects of monitoring. We find that monitoring reduces the average performance of workers, in particular among the intrinsically motivated workforce. Moreover, monitoring cultivates the average worker: There are fewer high performers and the variance in performance is significantly reduced. Importantly, we show that performance reductions primarily occur among challenging tasks. These performance reductions significantly increase unit costs in our setting. This effect is particularly severe when challenging tasks have high marginal value, as in high-performance work systems or when tasks are complementary inputs into the production function.
    Keywords: Monitoring; Hidden Costs of Control; Remote work; Field experiment
    JEL: C93 D21 J24 M5
    Date: 2021–02–26
  6. By: Arai, Natsuki; Nakazawa, Nobuhiko
    Abstract: We estimate long-term peer effects in the workplace by investigating whether working with a future executive in the early stages of a junior employee's career will make them more likely to be promoted in the future. Using the data for comprehensive career history at the Japanese central administration, from 1946 to 2019, we find that long-term peer effects are substantial and persistent: Junior employees who work with a future executive in the same division during the first few years of their employment are promoted significantly faster, on average, than employees who do not work with a future executive. They are also more likely to be promoted to the executive level in the future. Additional empirical analysis suggests that improved network connections between senior and junior employees are crucial for the promotion of junior employees in the future.
    Keywords: Peer Effect, Coworkers, Promotion, Productivity, Social Connection
    JEL: J01 J24 M12 M51
    Date: 2021–02
  7. By: Supreet Kaur (University of California, Berkeley - Department of Economics; NBER); Sendhil Mullainathan (University of Chicago - Booth School of Business; NBER); Suanna Oh (Paris School of Economics); Frank Schilbach (Massachusetts Institute of Technology - Department of Economics; NBER)
    Abstract: We test whether increasing cash-on-hand raises the productivity of poor workers. Our motivation is psychological. Concerns about money can create mental burdens such as worry, stress, or sadness. These in turn could interfere with the ability to work effectively. We empirically test for this possibility using a field experiment with piece-rate manufacturing workers in India. We randomize the timing of income receipt, so that on a given day some workers have more cash-on-hand than others. This manipulation holds constant wages and piece rates, as well as human and physical capital. On cash-rich days, average productivity increases by 0.11 standard deviations (6.2%); this effect is concentrated among relatively poorer workers. Mistakes also decline on these days — an effect that is again concentrated among poorer workers. Having more cash-on-hand thus enables workers to work faster while making fewer errors, suggesting improved cognition. We argue that mechanisms such as gift exchange, trust, and nutrition cannot account for our findings. Instead, our results suggest a range of psychological mechanisms wherein alleviating financial concerns allows workers to be more attentive and productive at work.
    JEL: D03 D14 D31 J24 O1
    Date: 2020
  8. By: Godager, Geir (Department of Health Management and Health Economics); Hennig-Schmidt, Heike (BonnEconLab, University of Bonn, Germany); Li, Jing Jing (Shandong Provincial Hospital Affiliated to Shandong First Medical University, Jinan, Shandong, China); Wang, Jian (Dong Fureng Institute of Economic and Social Development, Wuhan University, China); Yang, Fan (Department of Health Management and Health Economics)
    Abstract: It is rarely the case that differences in behaviors of females and males are described under a ceteris paribus condition, and behaviors can potentially be influenced by the environment in which decisions are made. In the case of medical decisions, physicians are expected to account for patient characteristics as well as observed and unobserved contextual factors, such as whether the patient has a healthy lifestyle. Since one usually do not randomize physicians to context, reported gender differences in medical practice can have several alternative interpretations. <p> A key question is whether the medical treatment of a given patient is expected to depend on the gender of the physician. To address this question, we quantify gender effects using data from an incentivized laboratory experiment, where Chinese medical doctors and Chinese medical students choose medical treatment under different payment schemes. We estimate preference parameters of females and males assuming decision-makers have patient-regarding preferences. We cannot reject the hypothesis that gender differences in treatment choices are absent. Preference parameters of females and males are not statistically different in a log-likelihood ratio test, and there is no evidence that the degree of randomness in choices differs between genders. <p> The absence of gender effects in the laboratory, where choice context is fixed, provides nuance to previous findings on gender differences, and highlights the general difficulty of separating individuals’ behavior from the context they are in.
    Keywords: Gender; Laboratory experiment; Bounded rationality; Physician behavior
    JEL: C92 D82 H40 I11 J33
    Date: 2021–02–22
  9. By: Del Carpio, Ximena; Taskin, Temel
    Abstract: This paper examines the quality of management practices in Turkey and its relation to other firm-level characteristics such as firm performance, competition, and type of ownership. A key finding is that management quality is positively correlated with productivity and quality of jobs across subsectors of manufacturing. But the average score of management quality in Turkey is relatively low compared to peer countries. Factors such as firm size, level of human capital of the workforce, export intensity of the firm, openness to international markets, level of hierarchy in decision making, and degree of managerial autonomy are found to be important determinants of managerial practices in Turkey. Thus, improvements in these dimensions, through relevant policies and incentives, can have a positive effect on the quality of firm management going forward.Such improvements in management practices—particularly in the two dimensions whereTurkey scores lowest: monitoring and targeting—can have positive effects on firmperformance and lead to increases in the creation of quality jobs.
    Keywords: paper issue; management operation; per capita income level; human capital of worker; regional per capita income; higher level of education; lack of knowledge; human resource management; journal of finance; improvements in management; quality of job; impact of competition; flexible labor market; privileges and immunity; principal component analysis; product market competition; underdeveloped financial market; Rule of Law; intensity of competition; quality assurance process; types of firms
    Date: 2019–04–01
  10. By: Kilian Huber (University of Chicago - Booth School of Business); Volker Lindenthal (Ludwig Maximilian University of Munich); Fabian Waldinger (University of Warwick - Department of Economics)
    Abstract: Large-scale increases in discrimination can lead to dismissals of highly qualified managers. We investigate how expulsions of senior Jewish managers, due to rising discrimination in Nazi Germany, affected large corporations. Firms that lost Jewish managers experienced persistent reductions in stock prices, dividends, and returns on assets. Aggregate market value fell by roughly 1.8 percent of German GNP because of the expulsions. Managers who served as key connectors to other firms and managers who were highly educated were particularly important for firm performance. The findings imply that individual managers drive firm performance. Discrimination against qualified business leaders causes first-order economic losses.
    Date: 2020
  11. By: Diane Pelly; Michael Daly; Liam Delaney; Orla Doyle
    Abstract: The potential impact of COVID-19 restrictions on worker well-being is currently unknown. In this study we examine 15 well-being outcomes collected from 621 full-time workers assessed before (November, 2019 - February, 2020) and during (May-June, 2020) the COVID-19 pandemic. Fixed effects analyses are used to investigate how the COVID-19 restrictions and involuntary homeworking affect well-being and job performance. The majority of worker well-being measures are not adversely affected. Homeworkers feel more engaged and autonomous, experience fewer negative emotions and feel more connected to their organisations. However, these improvements come at the expense of reduced homelife satisfaction and job performance.
    Keywords: COVID-19 restrictions; Workers; Homeworking; Subjective well-being; Productivity; Mental health; Job satisfaction; Engagement
    JEL: J08 J24 I31
    Date: 2021–02
  12. By: Bandiera, Oriana; Prat, Andrea; Hansen, Stephen; Sadun, Raffaella
    Abstract: We develop a new method to measure CEO behavior in large samples via a survey that collects high-frequency, high-dimensional diary data and a machine learning algorithm that estimates behavioral types. Applying this method to 1,114 CEOs in six countries reveals two types: “leaders,” who do multifunction, high-level meetings, and “managers,” who do individual meetings with core functions. Firms that hire leaders perform better, and it takes three years for a new CEO to make a difference. Structural estimates indicate that productivity differentials are due to mismatches rather than to leaders being better for all firms.
    JEL: J50
    Date: 2020–04–01

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