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on Human Capital and Human Resource Management |
| By: | Erwin Bulte; John List; Daan van Soest |
| Abstract: | Incomplete contracts are the rule rather than the exception, and any incentive scheme faces the risk of improving performance on incented aspects of a task at the detriment of performance on non-incented aspects. Recent research documents the effect of loss-framed versus gain-framed incentives on incentivized behavior, but how do such incentives affect overall performance? We explore potential trade-offs by conducting field experiments in an artificial "workplace". We explore two types of incentive spillovers: those contemporaneous to the incented task and those subsequent to the incented task. We report three main results. First, consonant with the extant literature, a loss aversion incentive induces greater effort on the incented task. Second, offsetting this productivity gain, we find that the quality of work decreases if quality is not specified in the incentive contract. Third, we find no evidence of harmful spillover effects to subsequent tasks; if anything, the loss aversion incentive induces more effort in subsequent tasks. Taken together, our results highlight that measuring and accounting for incentive spillovers are important when considering their overall impact. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:feb:framed:00727&r=all |
| By: | Michalis Drouvelis; Martin G. Kocher |
| Abstract: | Our results from a laboratory experiment offer new evidence for the detrimental effects that cheating behaviour in the workplace may have on the degree of reciprocity between firms and workers. First, we replicate existing findings showing that in the absence of monitoring (cheating is possible) workers cheat on their actual performance in a real-effort task. The extent of cheating influences how firms (managers) decide to set their wages in a subsequent gift-exchange game. Specifically, firms offer higher wages to workers who cheat and interestingly, workers expect such behaviour by firms. These higher wages are not matched by workers’ performance in the gift-exchange game, where cheating is not possible, resulting in a flat wage-effort relationship. In contrast, in the presence of monitoring (cheating is not possible), we find a positive relationship between wages offered and effort provided by the workers. Our findings have implications for adopting measures at the workplace that eliminate workers’ opportunities to cheat on their performance. |
| Keywords: | cheating, gift-exchange, labour market, experiment |
| JEL: | C72 C91 D21 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8942&r=all |
| By: | Ola Kvaløy; Trond E. Olsen |
| Abstract: | Reward systems based on balanced scorecards typically connect pay to an index, i.e. a weighted sum of multiple performance measures. We show that such an index contract may indeed be optimal if performance measures are non-verifiable so that the contracting parties must rely on self-enforcement. Under commonly invoked assumptions (including normally distributed measurements), the optimal self-enforcing (relational) contract between a principal and a multitasking agent is an index contract where the agent gets a bonus if a weighted sum of per-formance outcomes on the various tasks (the index) exceeds a hurdle. The weights reflect a trade-off between distortion and precision for the measures. The efficiency of the contract improves with higher precision of the index measure, since this strengthens incentives. Correlations between measurements may for this reason be beneficial. For a similar reason, the principal may also want to include verifiable performance measures in the relational index contract in order to improve incentives. |
| Keywords: | incentives, performance measures, relational contracts |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8922&r=all |
| By: | Francesco Devicienti; Elena Grinza; Davide Vannoni |
| Abstract: | This paper investigates the costs for firms of employing women full-time versus part-time in terms of differential hourly wages. To this end, we use administrative matched employer employee data on the universe of female workers in Italy over 33 years and rely on regression models that control for worker, firm, and job match fixed effects, in addition to several worker-, job-, and firm-level time-varying factors. We find that, when a worker switches from a full-time to a part-time contract within the same firm, she benefits from an increase in the hourly wage. Over the last three decades, these wage premiums have significantly reduced, remaining positive and significant up to 2015. We also find that the part-time premium is pervasive and stable across many different labor market segments and independent of workers’ intrinsic productivity levels. These and other findings appear to be compatible with developments in wage bargaining institutions, whereby more generous conditions can be accorded to part-timers. Coupled with the detrimental effect of part-time work on firm productivity documented by Devicienti et al. (2018), our results contribute to explain why firms are often unwilling to concede part-time positions to employees asking for them. |
| Keywords: | Part-time/full-time wage differentials, wage bargaining institutions, multiple fixed-effects regressions, administrative matched employer-employee longitudinal data. |
| JEL: | J31 J22 J53 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wpaper:606&r=all |
| By: | Benjamin Lochner (University of Erlangen-Nuremberg and Institute for Employment Research (IAB)); Bastian Schulz (Department of Economics and Business Economics, the Dale T. Mortensen Centre, Aarhus University and CESifo) |
| Abstract: | We study the link between firms’ productivity and the wages firms pay. Guided by labor market sorting theory, we infer firm productivity from estimating firm-level production functions, taking into account that worker ability and firm productivity may interact at the match level. Using German data, we find that high wages are not necessarily a reflection of high firm productivity. Observed worker transitions towards higher wages are sometimes directed downwards on the firm-productivity ladder. Worker sorting into high-productivity firms is thus less pronounced than sorting into high-wage firms. Consequently, an implication of increasing wage sorting could be decreasing allocative efficiency. |
| Keywords: | Assortative Matching, Labor Market Sorting, Wage Inequality, Job Mobility, Unobserved Heterogeneity, Firm Productivity, Production Function Estimation |
| JEL: | J24 J31 J40 J62 J64 L25 |
| Date: | 2021–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:aah:aarhec:2021-04&r=all |
| By: | Joonkyu Choi; Nathan Goldschlag; John C. Haltiwanger; J. Daniel Kim |
| Abstract: | We explore the role of founding teams in accounting for the post-entry dynamics of startups. While the entrepreneurship literature has largely focused on business founders, we broaden this view by considering founding teams as both the founders and early joiners. We investigate the idea that the success of a startup may derive from the organizational capital that is created at firm formation and is inalienable from the founding team itself. To test this hypothesis, we exploit premature deaths to identify the causal impact of losing a founding team member on startup performance. We find that the exogenous separation of a founding team member due to premature death has a persistently large, negative, and statistically significant impact on post-entry size, survival, and productivity of startups. Consistent with our organizational capital hypothesis, effects are stronger for firms with small founding teams and those operating in business-to-business (B2B) oriented sectors. Moreover, while we find that the loss of a founder has an especially large adverse effect, the loss of an early joiner nonetheless exhibits a significant negative effect, lending support to our inclusive definition of founding teams. |
| JEL: | J24 L23 L26 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28417&r=all |
| By: | Jarkko Harju; Simon Jäger; Benjamin Schoefer |
| Abstract: | We estimate the effects of worker voice on job quality and separations. We leverage the 1991 introduction of worker representation on boards of Finnish firms with at least 150 employees. In contrast to exit-voice theory, our difference-in-differences design reveals no effects on voluntary job separations, and at most small positive effects on other measures of job quality (job security, health, subjective job quality, and wages). Worker voice slightly raised firm survival, productivity, and capital intensity. A 2008 introduction of shop-floor representation had similarly limited effects. Interviews and surveys indicate that worker representation facilitates information sharing rather than boosting labor’s power. |
| Keywords: | worker representation, job separation, job quality, wages, firm survival, productivity, capital intensity |
| JEL: | G30 J30 J50 J63 L22 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8936&r=all |
| By: | Ann L. Owen; Judit Temesvary; Andrew Wei |
| Abstract: | We examine the effect of the social networks of bank directors on board gender diversity and compensation using a unique, newly compiled dataset over the 1999-2018 period. We find that within-board social networks are extensive, but there are significant differences in the size and gender composition of social networks of male vs female bank directors. We also find that samegender networks play an important role in determining the gender composition of bank boards. Finally, we show that those connected to male directors receive higher compensation, but we find no evidence that connections to female directors are influential in determining pay and bonuses. |
| Keywords: | Bank boards; Social networks; Gender; Gender diversity |
| JEL: | G21 G34 J16 |
| Date: | 2021–03–22 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2021-21&r=all |
| By: | Niklas Gohl; Peter Haan; Elisabeth Kurz; Felix Weinhardt |
| Abstract: | This paper provides a novel test of a key prediction of human capital theory that educational investment decisions depend on the length of the pay-off period. We obtain causal estimates by leveraging a unique reform of the German public pension system that, across a sharp date-of-birth cutoff, increased the early retirement age by three years. Using RDD, DiD, and IV estimation strategies on census and household-panel data, we show that this reform causally increased educational investment in the form of on-the-job training. In contrast, non-job related training before retirement was not affected. We explore heterogeneity and additional outcomes. |
| Keywords: | human capital, retirement policies, RDD |
| JEL: | J24 J26 H21 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1753&r=all |
| By: | Hennig, Jan Christoph; Hullmann, Rieke; Rau, Holger A.; Wolff, Michael |
| Abstract: | Many firms use equity-based profit sharing to boost participation in employee stock purchase plans (ESPPs). Using a large panel data set (N=262,824) of a multinational firm, we compare the reactions of former ESPP participants and non-participants to a profit sharing distribution (PSD). We find a dysfunctional effect. Although many former non-participants sign in, almost a similar share of employees leave the ESPP after the PSD. A closer look highlights the importance of social preferences when all employees enjoy profit sharing. Prosocial former participants show a motivational crowding out effect and leave the program, as the equity norm is violated. |
| Keywords: | Employee Stock Purchase Plans,Gift Exchange,Motivational Crowding Out,NormViolation |
| JEL: | D03 J24 J33 J54 M52 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:414&r=all |
| By: | Le Maux, Benoît; Masclet, David; Necker, Sarah |
| Abstract: | We analyze both theoretically and empirically how monetary incentives and information about others' behavior affect dishonesty. We run a laboratory experiment with 560 participants, each of whom observes a number from one to six with there being a payoff associated with each number. They can either truthfully report the number they see or lie about it in order to increase their payoff. We vary both the size of the payoff (Low, High, and Very High) and the amount of information about others' dishonesty (With and Without Information). We first find that dishonesty falls in the Very High treatment. Second, while social information has on average at most a weak positive effect, there is a strong effect if the accuracy of individuals' beliefs is accounted for. Third, social information and payoffs do not interact with each other. |
| Keywords: | Laboratory experiment,theory,cheating,monetary incentives,information on others' behavior,lying costs |
| JEL: | C91 D03 D78 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:aluord:2103&r=all |
| By: | Stefan Lautenbacher |
| Abstract: | Based on a new survey question in a large and representative panel of German firms, this paper introduces a novel measure of managers’ subjective uncertainty. I compare this measure of business uncertainty to respondents’ business expectations and document a strong negative relationship. However, the link is much weaker in bad times, since uncertainty is then persistently high – even when expectations are favorable. I continue by investigating the relative importance of uncertainty and expectations for corporate decisions. Exploiting information on firms’ investment and labor reactions to the COVID-19 crisis, I do not find evidence that uncertainty induced “wait and see” behavior. However, a deterioration in managers’ expectations and in their assessment of their firms’ business situation predicts investment deferral and a reduction in employment. |
| Keywords: | Subjective uncertainty, expectations, firms, survey data, corporate decisions, business cycles |
| JEL: | C83 D22 D84 E32 E71 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ifowps:_349&r=all |