nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2021‒08‒09
seven papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Incentives, self-selection, and coordination of motivated agents for the production of social goods By Bauer, Kevin; Kosfeld, Michael; von Siemens, Ferdinand
  2. Gender, age and nationality diversity in UK banks By Suss, Joel; Angeli, Marilena; Eckley, Peter
  3. The return on human (STEM) capital in Belgium By Gert Bijnens; Emmanuel Dhyne
  4. Evaluation of the Effects of the Performance-Based Bonus Incentive Scheme By Albert, Jose Ramon G.; Mendoza, Ronald U.; Vizmanos, Jana Flor V.; Cuenca, Janet S.; Muñoz, Mika S.
  5. Informal Incentives, Labor Supply, and the Effect of Immigration on Wages By Matthias Fahn; Takeshi Murooka
  6. Mandatory Advance Notice of Layoff: Evidence and Efficiency Considerations By Jonas Cederlöf; Peter Fredriksson; Arash Nekoei; David Seim
  7. CSR, audit quality and firm performance during COVID-19: an organizational legitimacy perspective By Yadav, Sandeep; Srivastava, Jagriti

  1. By: Bauer, Kevin; Kosfeld, Michael; von Siemens, Ferdinand
    Abstract: We study, theoretically and empirically, the effects of incentives on the self-selection and coordination of motivated agents to produce a social good. Agents join teams where they allocate effort to either generate individual monetary rewards (selfish effort) or contribute to the production of a social good with positive effort complementarities (social effort). Agents differ in their motivation to exert social effort. Our model predicts that lowering incentives for selfish effort in one team increases social good production by selectively attracting and coordinating motivated agents. We test this prediction in a lab experiment allowing us to cleanly separate the selection effect from other effects of low incentives. Results show that social good production more than doubles in the lowincentive team, but only if self-selection is possible. Our analysis highlights the important role of incentives in the matching of motivated agents engaged in social good production.
    Keywords: incentives,intrinsic motivation,self-selection,public service
    JEL: C91 D90 J24 J31 M52
    Date: 2021
  2. By: Suss, Joel (Bank of England); Angeli, Marilena (Bank of England); Eckley, Peter (Bank of England)
    Abstract: Using a novel regulatory dataset, we study board and senior manager diversity of gender, age and nationality in UK banks. Gender diversity increased steadily over the last two decades, albeit from a very low base and to only 20% by the end of 2020. Moreover, we find evidence of a ‘glass ceiling’, with the proportion of females increasing more slowly in the most influential roles. Age and nationality diversity changed less over time. Empirical results suggest that gender and nationality diversity are related to positive risk and performance outcomes, whereas the reverse is true for age diversity. However, these findings are derived from analysing differences between banks, which exhibit substantially more variation than changes in diversity within banks over time. When we only exploit variation in diversity within banks, we do not find any relationship between diversity and outcomes.
    Keywords: Diversity; bank risk; supervision
    JEL: G21 M14
    Date: 2021–07–07
  3. By: Gert Bijnens (Economics and Research Department, NBB); Emmanuel Dhyne (Economics and Research Department, NBB)
    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: : human capital, skills, education, productivity, linked employer-employee data
    JEL: E24 I26 J24
    Date: 2021–07
  4. By: Albert, Jose Ramon G.; Mendoza, Ronald U.; Vizmanos, Jana Flor V.; Cuenca, Janet S.; Muñoz, Mika S.
    Abstract: In 2012, the government established a Performance-Based Bonus (PBB) scheme to reward performance, align individual personnel and team-level efforts with agency-wide targets, and improve public service delivery in the Executive Department. The Department of Budget and Management, together with other oversight agencies and the Development Academy of the Philippines, manage the implementation of the PBB using the framework of the Results-Based Performance Management System. They deem it critical to study the effect of the PBB on government efforts to boost productivity and push reforms, as well as government employees’ individual and team-level motivations and productivity, especially given the budgetary implications of the incentive scheme. Prior to this study, a process evaluation of the PBB was conducted to clarify whether and to what extent the PBB worked as planned. This follow-up study examines the possible impact of the PBB by employing mixed methods research drawing on primary and secondary data, undertaking not only a perception-based survey on effects of the PBB on over 1,200 respondents, but also seven focus group discussions with PBB focal points and members of the performance management teams of selected agencies, as well as representatives of oversight agencies. The findings suggest while the PBB has had some design issues and implementation challenges (e.g. changes in eligibility requirements across the years, gaming and dysfunctional behavior), the PBB is generally welcomed across the bureaucracy. Further, there is evidence that the PBB has contributed to boosting individual, team-level and agency-wide improvements in motivation and productivity. Results of the study suggest that PBB could be further re-designed to sharpen its effects on public sector reform. <p> Comments to this paper are welcome within 60 days from date of posting. Email <p>
    Keywords: productivity, performance-based bonus, public sector performance, motivation Results-Based Performance Management
    Date: 2020
  5. By: Matthias Fahn; Takeshi Murooka
    Abstract: This paper theoretically investigates how an increase in the supply of homogenous workers can raise wages, generating new insights on potential drivers for the observed non-negative wage effects of immigration. We develop a model of a labor market with frictions in which firms can motivate workers only through informal incentives. A higher labor supply increases firms’ chances of filling a vacancy, which reduces their credibility to compensate workers for their effort. As a response, firms endogenously generate costs of turnover by paying workers a rent, and this rent is higher if an increase in labor supply reduces a firm’s credibility. By this effect, a higher labor supply — for example caused by immigration — can increase workers’ compensation. Moreover, an asymmetric equilibrium exists in which native workers are paid higher wages than immigrants and work harder. In such an equilibrium, an inflow of immigrants increases productivity, profits, and employment.
    Keywords: Informal Incentives, Labor Supply, Immigration.
    JEL: D21 D86 F22 J21 J61 L22
    Date: 2021–05
  6. By: Jonas Cederlöf; Peter Fredriksson; Arash Nekoei; David Seim
    Abstract: We investigate a prevalent, but understudied, employment protection policy: mandatory advance notice (MN), requiring employers to notify employees of forthcoming layoffs. MN increases future production, as notified workers search on the job, but reduces current production as they supply less effort. Our theoretical model captures this trade-off and predicts that MN improves production efficiency by increasing information sharing, whereas large production losses can be avoided by worker-firm agreements on side-payments – severance pay – in lieu of MN. We provide evidence of such severance increases in response to an extension of MN using novel Swedish administrative data. We then estimate the production gain of MN: extending the MN period leads to shorter non-employment duration and higher reemployment wages, plausibly driven by on-the-job search. Using variation in notice duration across firms, we estimate the productivity loss of notice. The estimates of benefits and costs suggest that MN has a positive net impact on production, offering an empirically-grounded efficiency argument for mandating notice.
    Keywords: unemployment, advance notice, job mobility, job quality
    JEL: J31 J33 J63 J68
    Date: 2021
  7. By: Yadav, Sandeep; Srivastava, Jagriti
    Abstract: Purpose - COVID-19 induced uncertainty in the firms’ business transactions, product-market competition and financial market cause severe organizational legitimacy crisis. Using the organizational legitimacy perspective, we study the relationship between corporate social responsibility (CSR) activities, audit quality, and firm performance. Design/methodology/approach – We use a quarterly panel of 89,185 firm observations (15,955 unique firms) from 131 countries from July 2018 to December 2020 for 10 quarters. We use a Difference-in-Difference (DiD) method to estimate the effect of CSR activities and audit quality on firm performance during the COVID-19 period. Findings - We find a U-shaped relationship between CSR and firm performance. This relationship is strengthened during COVID-19. In contrast, we find an inverted U-shaped relationship between firm audit quality (audit fee) and firm performance. However, this relationship is weakened during the pandemic. Originality/value – Our study makes important contributions to theory and practice on maintaining organizational legitimacy during the pandemic. During the crisis, managers need to focus on strategies increasing firm value for the time period. This study shows that firms’ temporal legitimacy gaining practices such as CSR activities and audit quality provides an opportunity to increase firm value. Firm managers also need to identify the optimal level of CSR activities and audit fees to balance the cost of agency and the benefits of legitimacy.
    Keywords: CSR, audit quality, COVID-19, firm performance, organizational legitimacy
    JEL: M14 M42
    Date: 2021–06

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