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on Human Capital and Human Resource Management |
| By: | Ghatak, Maitreesh; Wahhaj, Zaki |
| Abstract: | What are the determinants of an organization's investment in the loyalty and motivation of its workers? We develop a simple principal-agent model where the standard optimal contract is to offer a bonus that trades off incentive provision versus rent extraction. We allow the principal to undertake two types of motivational investments - one that increases the agent's disutility from deviating from a prescribed effort level, and another that increases the agent's on-the-job satisfaction. We argue that these two types of investments can capture a range of organizational practices - other than extrinsic rewards - that aim to raise worker motivation. We show that the two types of motivational investments are complements and both are substitutes to financial incentives. Our analysis implies that technological improvements in the form of improved worker productivity or greater observability of output will induce profit-maximizing firms to make greater use of financial incentives and less use of motivational investments. The reason is that while financial incentives have constant returns in terms of its effect on the worker's effort level, motivational investments by their very nature have decreasing returns. |
| Keywords: | investment in worker motivation; Job Satisfaction; Motivated agents; worker moral hazard |
| JEL: | D23 D86 D91 J33 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15172&r= |
| By: | Furmaco, L. (Department of Economics and the Murphy Institute, Tulane University, IZA, GLO); Longley, N. (Department of Business, Nevada State College); Palermo, A. (Institute for Labour Law and Industrial Relations in the European Union); Rossi, G. (University of Birkbeck, London) |
| Abstract: | We investigate whether employees vary their performance during fixed-term contracts. We follow National Hockey League players’ performance over ten seasons. We use a two-stage least square fixed effect model to address empirical limitations in previous studies. We find that players’ performance varies at the end of the contract depending on ability, tenure, and (geographical) willingness to move. In particular, long-tenure and low-ability short-tenure workers vary their performance, depending on their continent of origin; these results might be due to different willingness to move, at different stages of players’ career. |
| Keywords: | fixed-term contracts, incentives, shirking behavior, strategic behavior |
| JEL: | D82 J24 J33 M52 Z22 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:tul:wpaper:2107&r= |
| By: | Guenzel, Marius; Malmendier, Ulrike M. |
| 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 behavioral forces to exert a significant influence at every stage of a 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 effect is clouded by self-attribution bias and difficult to disentangle from that 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 or is 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-from refining selection mechanisms, designing and implementing corporate repairs, and reshaping corporate governance to accounting not only for incentive misalignments but also for biased decision-making. |
| Keywords: | Behavioral Corporate Finance; CEO Careers; corporate governance; Financing; investment; Managerial Biases; mergers and acquisitions; Organizational economics |
| JEL: | G3 G32 G34 G4 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15103&r= |
| By: | Akerlof, Robert; Ashraf, Anik; Macchiavello, Rocco; Rabbani, Atonu |
| Abstract: | Conflicts between management and workers are common and can have significant impacts on productivity. We study how workers in a large Bangladeshi sweater factory responded to management's decision to lay off about a quarter of the workers following a period of labor unrest. Our main finding is that the mass layoff resulted in a large and persistent reduction in the productivity of surviving workers. Moreover, it is specifically the firing of peers with whom workers had social connections â?? \textit{friends} â?? that matters. We also provide suggestive evidence of deliberate shading of performance by workers in order to punish the factory's management, and a corresponding deliberate attempt by the factory to win the angry workers back by selectively giving them tasks that are more rewarding. By combining ethnographic and survey data on the socialization process with the factory's internal records, the paper provides a rare glimpse into the aftermath of an episode of labor unrest. A portrait of the firm emerges as a web of interconnected relational agreements supported by social connections. |
| Keywords: | layoffs; Morale; productivity; Relational Contracts |
| JEL: | J50 M50 O12 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15106&r= |
| By: | Zimpelmann, Christian (IZA); Gaudecker, Hans-Martin von (University of Bonn); Holler, Radost (Bonn Graduate School of Economics); Janys, Lena (University of Bonn); Siflinger, Bettina M. (Tilburg University) |
| Abstract: | Using customized panel data spanning the entire year of 2020, we analyze the dynamics of working hours and household income across different stages of the CoVid-19 pandemic. Similar to many other countries, during this period the Netherlands experienced a quick spread of the SARS-CoV-2 virus, adopted a set of fairly strict social distancing measures, gradually reopened, and imposed another lockdown to contain the second wave. We show that socio-economic status is strongly related to changes in working hours, especially when strict economic restrictions are in place. In contrast, household income is equally unaffected for all socio-economic groups. Examining the drivers of these observations, we find that pandemic-specific job characteristics (the ability to work from home and essential worker status) explain most of the socio-economic gradient in total working hours. Furthermore, household income is largely decoupled from shocks to working hours for employees. We provide suggestive evidence that large-scale labor hoarding schemes have helped insure employees against demand shocks to their employees. |
| Keywords: | essential workers, coronavirus, working from home, labor market, inequality, mitigation policies, COVID-19 |
| JEL: | D31 J21 J22 J24 J33 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14382&r= |
| By: | Nicola Bianchi; Michela Giorcelli |
| Abstract: | This paper examines the long-term and spillover effects of management interventions on firm performance. Under the Training Within Industry (TWI) program, the U.S. government provided management training to firms involved in war production between 1940 and 1945. Using a newly collected panel dataset on all 11,575 U.S. firms that applied to the program, we find that the TWI training had positive and long-lasting effects on firm performance and the adoption of beneficial managerial practices. Moreover, it generated complementarities among different types of training and had positive spillover effects on the supply chain of trained firms. |
| JEL: | J24 L2 M2 M5 N34 N64 O15 O32 O33 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28833&r= |
| By: | Ljungqvist, Alexander P.; Raff, Konrad |
| Abstract: | We ask when and how a diverse board can benefit shareholders. Board diversity may be value-increasing even if some directors have agendas that are not perfectly aligned with shareholders' interests. Diversity commits the board to a high information standard because directors with opposing agendas are deadlocked unless they have persuasive information in support of the optimal course of action. Since deadlock is costly, diversity strengthens directors' incentives to gather information ex ante, which raises expected firm value. Diversity is more likely desirable if the firm's information environment is poor and if directors' opposing agendas are accompanied by sufficiently strong incentives for value maximization. However, if directors cannot credibly communicate their information, a homogeneous board dominates a diverse board. |
| Keywords: | Boards of directors; deadlock; diversity; Monitoring |
| JEL: | G34 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15165&r= |
| By: | Azmat, Ghazala Y.; Hensvik, Lena; Rosenqvist, Olof |
| Abstract: | Following the arrival of the first child, women's absence rates soar and become less predictable due to the greater frequency of their own sickness and the need to care for sick children. In this paper, we argue that this fall in presenteeism in the workplace hurts women's wages, not only indirectly and gradually, through a slower accumulation of human capital, but also immediately, through a direct negative effect on productivity in unique jobs (i.e., jobs with low substitutability). Although both presenteeism and job uniqueness are highly rewarded, we document that women's likelihood of holding jobs with low substitutability decreases substantially relative to men's after the arrival of the first child. This gap persists over time, with important long-run wage implications. We highlight that the parenthood wage penalty for women could be reduced by organizing work in such a way that more employees have tasks that, at least in the short run, can be performed satisfactorily by other employees in the workplace. |
| JEL: | J16 J22 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14982&r= |
| By: | Genz, Sabrina; Schnabel, Claus |
| Abstract: | While numerous studies have analyzed the aggregate employment effects of digital technologies, this paper focuses on the employment development of individual workers exposed to digitalization. We use a unique linked employer-employee data set for Germany and a direct measure of the first-time introduction of cutting-edge digitalization technologies in establishments between 2011 and 2016. Applying a matching approach, we compare workers in establishments investing in digital technologies with similar employees in establishments that do not make such an investment. We find that the employment stability of incumbent workers is lower in investing than non-investing establishments, but most displaced workers easily find jobs in other firms, and differences in days in unemployment are small. We also document substantial heterogeneities in the employment effects across skill groups, occupational tasks performed, and gender. Employment reactions to digitalization are most pronounced for both low- and high-skilled workers, for workers with non-routine tasks, and for female workers. Our results underline the importance of tackling the impending digital divide among different groups of workers. |
| Keywords: | digitalization,employment,separations,skills,tasks |
| JEL: | J21 J63 O33 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:faulre:118&r= |
| By: | Briel, Stephanie; Osikominu, Aderonke; Pfeifer, Gregor; Reutter, Mirjam; Satlukal, Sascha |
| 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: | Decomposition Analyses; Gender pay gap; overconfidence; Unconditional Quantile Regressions (RIF-Regressions); wage expectations |
| JEL: | C21 D84 D91 J16 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15093&r= |