nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2021‒07‒12
twelve papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. CEO Compensation: Evidence from the Field By Alex Edmans; Tom Gosling; Dirk Jenter
  2. Women in the Boardroom: A Bottom-up Approach to the Trickle-down Effect By Anaïs, Périlleux; Ariane Szafarz
  3. Productivity and human capital: The Italian case By Camilla Andretta; Irene Brunetti; Anna Rosso
  4. Public Sector Jobs: Working in the Public Sector in Europe and the US By Checchi, Daniele; Fenizia, Alessandra; Lucifora, Claudio
  5. Human resource practices, perceived employability and turnover intention: does age matter? By Ludivine Martin; Uyen T. Nguyen-Thi; Caroline Mothe
  6. Financial distress and the role of management in micro and small-sized firms By Fernando Alexandre; Sara Cruz; Miguel Portela
  7. Give it Another Shot: Startup Experience and the Mobilization of Human Resources in New Ventures By Rocha, Vera; Pozzoli, Dario
  8. Working from home during COVID-19 and beyond: Survey evidence from employers By Erdsiek, Daniel
  9. Complex Job Design and Layers of Hierarchy By Russo, Giovanni; Van Houten, Gijs
  10. The return on human (STEM) capital in Belgium By Gert Bijnens; Emmanuel Dhyne
  11. Paying for health gains By Luigi Siciliani; James Gaughan; Nils Gutacker; Hugh Gravelle; Martin Chalkley
  12. Theoretical Foundations of Relational Incentive Contracts By Watson, Joel

  1. By: Alex Edmans; Tom Gosling; Dirk Jenter
    Abstract: We survey directors and investors on the objectives, constraints, and determinants of CEO pay. 67% of directors would sacrifice shareholder value to avoid controversy on CEO pay, implying they face significant constraints other than participation and incentive compatibility. These constraints lead to lower pay levels and more one-size-fits-all structures. Shareholders are the main source of constraints, suggesting directors and investors disagree on how to maximize value. Respondents view intrinsic motivation and reputation as stronger motivators than incentive pay. They believe pay matters to CEOs not to finance consumption, but because it affects perceptions of fairness. The need to fairly recognize the CEO’s contribution explains why flow pay responds to performance, even though CEOs’ equity holdings already provide substantial consumption incentives, and why peer firm pay matters beyond retention concerns. Fairness also matters to investors, with shareholder returns an important reference point. This causes CEO pay to be affected by external risks, in contrast to optimal risk sharing.
    Keywords: executive compensation, contract theory, CEO incentives, fairness, survey
    JEL: G34 G38 M12 M52
    Date: 2021
  2. By: Anaïs, Périlleux (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Ariane Szafarz (ULB, New York University, CEB and CERMI)
    Abstract: This paper argues that role modeling can explain the impact of boardroom gender diversity on corporate performance. It theorizes that female workers are boosted by female leadership, gain increased motivation, and achieve greater productivity, thereby making their female directors more effective. We test this bottom-up approach to the trickle-down hypothesis on data handcollected among local cooperatives providing microcredit in Senegal. All the organizations surveyed are similar and small, which allows us to use a homogenous performance metric. All of them outsource their human resource management to the same third party, which mitigates the risk of endogeneity. The data cover over 100,000 triads composed of: gender dominance on the board, gender of CEO, and gender of credit officer. A better financial performance is achieved when the triad is gender-uniform—be it male or female—confirming the importance of role modeling and suggesting that the performance of female board members depends on the gender composition of the workforce.
    Keywords: Gender, Board, Trickle-Down Effect, CEO, Perfomance, Leadership
    JEL: M14 J82 M54 J54 O15
    Date: 2021–06–18
  3. By: Camilla Andretta; Irene Brunetti; Anna Rosso
    Abstract: This paper investigates whether and how worker composition, ownership and management affect the productivity of firms. To this aim, we use a dataset obtained by integrating the micro-data drawn from Rilevazione su Imprese e Lavoro (RIL), a survey conducted by Inapp in 2010 and 2015 on a representative sample of Italian limited liability and partnership firms, with the AIDA archive containing comprehensive information on the balance sheets of almost all the Italian corporations. We apply different regression models and the findings reveal that a higher share of skilled workers within firms and more experienced managers are associated with higher productivity levels. In addition, firms run by managers with higher education are more likely to introduce innovation. Finally, family ownership and the coincidence of management with ownership are negatively related with firm productivity.
    Keywords: firm, Human capital, productivity
    JEL: J24 D24
    Date: 2021–07–08
  4. By: Checchi, Daniele (University of Milan); Fenizia, Alessandra (George Washington University); Lucifora, Claudio (Università Cattolica del Sacro Cuore)
    Abstract: This paper reviews recent theoretical and empirical work on public employment management and presents novel stylized facts on public sector jobs. In the first part, we examine the evolution of managerial practices in the public sector and discuss the contractual arrangement of public sector workers and the labor market institutions that are prevalent in this setting. We argue that, for public sector employees, standard incentive schemes have a low power and are generally less effective than in the private sector. In the second part, we use two international surveys (6th European Working Conditions Survey, covering 28 European countries, and 2nd American Working Conditions Survey for the United States) to investigate selection into public sector employment, public-private pay differentials, and differences in working conditions in Europe and the US. While in Europe the public-private earning gap is positive for low-skilled workers and turns negative for skilled individuals, the gap is negative and relatively flat over the skill distribution in the US. We also document a positive public-private earnings differential in healthcare and education services in Europe, and a negative differential, though not statistically significant, in the US. We find that, in the US, two out of three public sector employees are exposed to some performance-related pay scheme, while in Europe is less than one in four. We do not find evidence that the public sector ensures a fairer work environment, as instances of harassment, discrimination, and obnoxious behavior are widespread.
    Keywords: public sector, managerial practices, public-private pay differentials, working conditions
    JEL: J45 J31 H50
    Date: 2021–06
  5. By: Ludivine Martin (LISER - Luxembourg Institute of Socio-Economic Research, CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique); Uyen T. Nguyen-Thi (LISER - Luxembourg Institute of Socio-Economic Research); Caroline Mothe (IREGE - Institut de Recherche en Gestion et en Economie - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc)
    Abstract: This paper investigates the age specificities in the link between employee's perceived external employability and turnover intention and how the use of human resource practices moderates this relationship. Results show that the use of motivation-enhancing HR practices induces a larger retention effect for younger and middle-aged employees than for older ones, whereas the turnover intention effects of flexibility-enhancing HR practices are stronger for the middle-age and older groups than for the younger groups. Moreover, the use of HR practices that stimulate employees' motivation, such as training, participation, voice and teamwork, plays a stronger role in retaining highly employable younger employees, while the use of HR practices that offer flexibility, such as flexible working time, teleworking and work-life balance, enables retaining highly employable older employees.
    Keywords: Turnover intention,perceived external employability,human resource practices,age
    Date: 2021
  6. By: Fernando Alexandre; Sara Cruz; Miguel Portela
    Abstract: In this paper, we focus on the managerial characteristics of micro and small-sized firms. Using linked employer-employee data on the Portuguese economy for the 2010-2018 period, we estimate the impact of management teams’ human capital on the probability of firms becoming financially distressed and their subsequent recovery. Our estimates show that the relevance of management teams’ formal education on the probability of firms becoming financially distressed depends on firms’ size and the type of education. We show that management teams’ formal education and tenure reduce the probability of micro and small-sized firms becoming financially distressed and increases the probability of their subsequent recovery. The estimates also suggest that those impacts are stronger for micro and small-sized firms. Additionally, our results show that functional experience previously acquired in other firms, namely in foreign-owned and in exporting firms and in the area of finance, may reduce the probability of micro firms becoming financially distressed. On the other hand, previous functional experience in other firms seems to have a strong and highly significant impact on increasing the odds of recovery of financially distressed firms. We conclude that policies that induce an improvement in the managerial human capital of micro and small-sized firms have significant scope to improve their financial condition, enhancing the economy’s resilience against shocks.
    Keywords: Financial distress, firm performance, human capital
    JEL: G32 J24 L25
    Date: 2021–07–08
  7. By: Rocha, Vera (Department of Strategy and Innovation, Copenhagen Business School); Pozzoli, Dario (Department of Economics, Copenhagen Business School)
    Abstract: Human resources can provide a competitive advantage to firms, but we still know little about how newly-founded ventures start mobilizing these resources. Given the central role of entrepreneurs’ background in designing the strategy of new firms, we investigate whether and how startup experience, namely past performance as entrepreneurs, influences employee mobilization strategies in new ventures. Integrating behavioral theories of the firm with regulatory focus theory, we postulate that serial entrepreneurs who failed in the past are more likely to be prevention oriented and change their employee mobilization strategies towards a more targeted hiring approach in subsequent ventures. Using Danish register data, we compare the employee sourcing practices of serial entrepreneurs with their former practices as novice entrepreneurs, as well as with a control group of first-time entrepreneurs who engage in serial venturing later on. We find that entrepreneurs who have already failed (i.e. discontinued a former business) select their employees from fewer sources in the labor market. Our tests lend support for learning as a key mechanism driving these differences. Alternative mechanisms such as selection effects, stigma of failure, and demand-side constraints are not empirically supported.
    Keywords: Failure; Hiring; New Ventures; Startup Experience; Human Capital
    JEL: J24 L21 L26 M13
    Date: 2021–06–18
  8. By: Erdsiek, Daniel
    Abstract: Based on survey responses from more than 1,700 managers in Germany, this study elicits employers' perceptions of working from home during COVID-19 and their long-term expectations for the time after the pandemic. Based on employers' forecasts of the share of employees working from home post-COVID, the within-firm intensity of the expected shift is quantified. Many firms expect a persistent shift towards working from home induced by the COVID-19 pandemic. Larger firms and firms with pre-COVID use of working from home are most likely to expect a persistent and intensive shift. As the empirical results indicate, underlying mechanisms for the expected shift might include learning effects facilitating an improved perception of working from home, investments in physical and human capital, a general push in firms' digital progress, and the fact that most firms do not observe a reduction in productivity due to working from home during COVID-19.
    Keywords: COVID-19,working from home,digitalisation,firm-level,managers,survey
    JEL: D22 D23 L22 O33 M54
    Date: 2021
  9. By: Russo, Giovanni (European Centre for the Development of Vocational Training (Cedefop)); Van Houten, Gijs (Eurofound - European Foundation for the Improvement of Living and Working Conditions)
    Abstract: The main function of hierarchies is to coordinate activities within an organisation, but a hierarchical structure also provides work incentives, by offering the prospect of hierarchical mobility. An alternative way for organisations to motivate workers is through job design. In organisations offering rewarding jobs, the incentivising role of hierarchies may become obsolete, and the number of hierarchical levels can be reduced. Two job design features are particularly relevant: autonomy and problem solving. We investigate the relationship between the number of hierarchical layers and job design features empirically using the European Company Survey (ECS 2019). We find that the extent of the adoption of both complex job design and autonomous teamwork are negatively associated with the number of hierarchical layers. However, the association between complex job design and the number of hierarchical layers is weakened, and in some cases disappears, in larger organisations where hierarchies have a more important coordination role and it is weakened when the knowledge acquisition costs are high. The use of autonomous teams is robustly negatively associated with the number of hierarchical layers.
    Keywords: job design, hierarchies, job complexity
    JEL: M51 L20 M50
    Date: 2021–06
  10. By: Gert Bijnens; Emmanuel Dhyne
    Abstract: Whilst overall productivity growth is stalling, firms at the frontier are still able to capture the benefits of the newest technologies and business practices. This paper uses linked employer-employee data covering all Belgian firms over a period of almost 20 years and investigates the differences in human capital between highly productive firms and less productive firms. We find a clear positive correlation between the share of high-skilled and STEM workers in a firm's workforce and its productivity. We obtain elasticities of 0.20 to 0.70 for a firm's productivity as a function of the share of high-skilled workers. For STEM (science, technology, engineering, mathematics) workers, of all skill levels, we find elasticities of 0.20 to 0.45. More importantly, the elasticity of STEM workers is increasing over time, whereas the elasticity of high-skilled workers is decreasing. This is possibly linked with the increasing number of tertiary education graduates and at the same time increased difficulties in filling STEM-related vacancies. Specifically, for high-skilled STEM workers in the manufacturing sector, the productivity gain can be as much as 4 times higher than the gain from hiring additional high-skilled non-STEM workers. To ensure that government efforts to increase the adoption of the latest technologies and business practices within firms lead to sustainable productivity gains, such actions should be accompanied by measures to increase the supply and mobility of human (STEM) capital. Without a proper supply of skills, firms will not be able to reap the full benefits of the digital revolution.
    Keywords: education, human capital, linked employer-employee data, productivity, Skills
    JEL: E24 I26 J24
    Date: 2021–07–08
  11. By: Luigi Siciliani (Department of Economics and Related Studies, University of York, York, UK.); James Gaughan (Centre for Health Economics, University of York, York, UK.); Nils Gutacker (Centre for Health Economics, University of York, York, UK.); Hugh Gravelle (Centre for Health Economics, University of York, York, UK.); Martin Chalkley (Centre for Health Economics, University of York, York, UK)
    Abstract: Payments to healthcare providers are often based on the number of patients they treat according to their particular health condition with well-known limitations. Payment based on health outcomes, a form of pay-for-performance, has long been advocated as a possible solution. This study adopts a contract theory approach and illustrates how it can inform practical implementation of pay-for-performance schemes that reward health outcomes. We first provide a simple but general model on the design of an incentive scheme that rewards providers for improved health, as a function of key parameters related to patient health benefits and provider costs. We then calibrate the model using data from two elective procedures, hip and knee replacement, using patient reported outcome measures. The pricing rule suggests that the bonus should be set to reflect the difference between the provider’s marginal cost of a health improvement before the policy intervention and the provider’s marginal cost evaluated at the target health set by the purchaser. We provide estimates of the optimal bonus for hip and knee replacement under a range of assumptions about provider cost functions and the value of health improvements.
    Keywords: hospitals, pay for performance, quality, health
    JEL: I11 I14 L13
    Date: 2021–07
  12. By: Watson, Joel
    Abstract: This article describes the emerging game-theoretic framework for modeling long-term contractual relationships with moral hazard. The framework combines self-enforcement and external enforcement, accommodating alternative assumptions regarding how actively the parties initially set and renegotiate the terms of their contract. A progression of theoretical components is reviewed, building from the recursive formulation of equilibrium continuation values in repeated games. A principal-agent setting serves as a running example. Expected final online publication date for the Annual Review of Economics, Volume 13 is August 2021. Please see for revised estimates.
    Date: 2021–08–02

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