nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2021‒11‒22
seven papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Reference Points and the Tradeoff between Risk and Incentives By Dohmen, Thomas; Non, Arjan; Stolp, Tom
  2. Moral Hazard, Dynamic Incentives, and Ambiguous Perceptions By Martin Dumav
  3. Formalized Employee Search and Labor Demand By Hensel, Lukas; Tekleselassie, Tsegay; Witte, Marc
  4. "Are you in the right job?" Human Capital Mismatch in the UK By Galanakis, Yannis
  5. Do workers, managers, and stations matter for effective policing? A decomposition of productivity into three dimensions of unobserved heterogeneity By Chaudhary, Amit
  6. Mission of the Company, Prosocial Attitudes and Job Preferences: A Discrete Choice Experiment By Non, Arjan; Rohde, Ingrid M.T.; de Grip, Andries; Dohmen, Thomas
  7. Why Working from Home Will Stick By Barrero, Jose Maria; Bloom, Nicholas; Davis, Steven J.

  1. By: Dohmen, Thomas (University of Bonn and IZA); Non, Arjan (Erasmus University Rotterdam); Stolp, Tom (SEO Amsterdam)
    Abstract: We conduct laboratory experiments to investigate basic predictions of principal-agent theory about the choice of piece rate contracts in the presence of output risk, and provide novel insights that reference dependent preferences affect the tradeoff between risk and incentives. Subjects in our experiments choose their compensation for performing a real-effort task from a menu of linear piece rate and fixed payment combinations. As classical principal-agent models predict, more risk averse individuals choose lower piece rates. However, in contrast to those predictions, we find that low-productivity risk averse workers choose higher piece rates when the riskiness of the environment increases. We hypothesize that reference points affect piece rate choice in risky environments, such that individuals whose expected earnings would exceed (fall below) the reference point in a risk-free environment behave risk averse (seeking) in risky environments. In a second experiment, we exogenously manipulate reference points and confirm this hypothesis.
    Keywords: incentive, piece-rate, risk, reference point, laboratory experiment
    JEL: D81 D91 M52
    Date: 2021–11
  2. By: Martin Dumav
    Abstract: This paper considers dynamic moral hazard settings, in which the consequences of the agent's actions are not precisely understood. In a new continuous-time moral hazard model with drift ambiguity, the agent's unobservable action translates to drift set that describe the evolution of output. The agent and the principal have imprecise information about the technology, and both seek robust performance from a contract in relation to their respective worst-case scenarios. We show that the optimal long-term contract aligns the parties' pessimistic expectations and broadly features compressing of the high-powered incentives. Methodologically, we provide a tractable way to formulate and characterize optimal long-run contracts with drift ambiguity. Substantively, our results provide some insights into the formal link between robustness and simplicity of dynamic contracts, in particular high-powered incentives become less effective in the presence of ambiguity.
    Date: 2021–10
  3. By: Hensel, Lukas (Peking University); Tekleselassie, Tsegay (Policy Studies Institute); Witte, Marc (IZA)
    Abstract: Firms often use social networks to find workers, limiting the pool of potential applicants. We conduct a field experiment subsidizing firms' formal vacancy posting. The subsidies increase non-network employee search and shift vacancies towards high-skilled positions. Post-treatment, firms continue searching for high-skilled workers despite reverting to network-based search. This change in skill requirements does not increase vacancy posting or hiring, suggesting substitutability between workers of different skill levels. Finally, we experimentally show that information asymmetries about applicants' skills do not limit firms' formal search. Our results highlight that exposure to different labor market segments can permanently change firms' labor demand.
    Keywords: firms, hiring, social networks, formalization, field experiments
    JEL: D22 J23 J46 C93
    Date: 2021–11
  4. By: Galanakis, Yannis
    Abstract: This paper examines a problem of worker misallocation into jobs. A theoretical model, allowing for heterogeneous workers and firms, shows that job search frictions generate mismatch between employees and employers. In the empirical analysis, the British Household Panel Survey (BHPS), the UK household Longitudinal Study (UKHLS) and British Cohort Study 1970 (BCS70) data are used to measure the incidence of mismatch, how it changes over time and whether it can be explained by unobserved ability. Results show that (i) the incidence of mismatch increases after the Great Recession. (ii) Individual transitions to/from matching take place due to workers' occupational mobility and over-time skills development. (iii) Employees can find better jobs or their mobility occurs earlier than the aggregate change of skills. (iv) Controlling for individual heterogeneity, measured by cognitive and non-cognitive skill test scores throughout childhood, does not decrease the incidence of mismatch. This suggests that unobserved productivity does not generate mismatch in the labour market.
    Keywords: Human Capital Mismatch,frictions,individual heterogeneity
    JEL: I26 J24 J31 J64
    Date: 2021
  5. By: Chaudhary, Amit (University of Warwick)
    Abstract: Misallocation of resources in an economy makes firms less productive. I document the roles of heterogeneity, sorting, and complementarity in a framework where workers, managers, and firms interact to shape productivity. The approach I follow uses the movement of workers and managers across firms to identify the distribution of productivity. I webscraped novel microdata of crime reports from the Indian police department and combined them with the worker-level measurement of productivity. Using this data I show that the third source of heterogeneity in the form of manager ability is an important driver of differences in firm productivity. I empirically identify complementarities between workers, managers, and firms using my estimation methodology. Counterfactual results show that reallocating workers by applying a positive assortative sorting rule can increase police department productivity by 10%.
    Date: 2021
  6. By: Non, Arjan (Erasmus University Rotterdam); Rohde, Ingrid M.T. (Istanbul Bilgi University); de Grip, Andries (ROA, Maastricht University); Dohmen, Thomas (University of Bonn and IZA)
    Abstract: We conduct a discrete choice experiment to investigate how the mission of high-tech companies affects job attractiveness and contributes to self-selection of science and engineering graduates who differ in prosocial attitudes. We characterize mission by whether or not the company combines its profit motive with a mission on innovation or corporate social responsibility (CSR). Furthermore, we vary job design (e.g. autonomy) and contractible job attributes (e.g. job security). We find that companies with a mission on innovation or CSR are considered more attractive. Women and individuals who are more altruistic and less competitive feel particularly attracted to such companies.
    Keywords: mission of the company, sorting, discrete choice experiment, job characteristics, social preferences
    JEL: J81 J82 M52
    Date: 2021–11
  7. By: Barrero, Jose Maria (Instituto Tecnologico Autonomo de Mexico); Bloom, Nicholas (Stanford University); Davis, Steven J. (University of Chicago)
    Abstract: COVID-19 drove a mass social experiment in working from home. We survey more than 30,000 Americans over multiple waves to investigate whether WFH will stick, and why. Our data say that 20 percent of full workdays will be supplied from home after the pandemic ends, compared with just five percent before. We develop evidence on five reasons for this large shift: better-than-expected WFH experiences, new investments in physical and human capital that enable WFH, greatly diminished stigma associated with WFH, lingering concerns about crowds and contagion risks, and a pandemic-driven surge in technological innovations that support WFH. We also use our survey data to project three consequences: First, employees will enjoy large benefits from greater remote work, especially those with higher earnings. Second, the shift to WFH will directly reduce spending in major city centers by at least five to ten percent relative to the pre-pandemic situation. Third, our data on employer plans and the relative productivity of WFH imply a five percent productivity boost in the post-pandemic economy due to re-optimized working arrangements. Only one-fifth of this productivity gain will show up in conventional productivity measures, because they do not capture the time savings from less commuting.
    JEL: D13 D23 E24 G18 J22 M54 R3
    Date: 2021–04

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