nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2023‒02‒27
nine papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. An Experimental Test of Algorithmic Dismissals By Brice Corgnet
  2. When are wages cut? The roles of incomplete contracts and employee involvement By Marco Fongoni; Daniel Schaefer; Carl Singleton
  3. Causal Misperceptions of the Part-Time Pay Gap By Annekatrin Schrenker
  4. Employee-Owned Firms and the Careers of Young Workers By Burdin, Gabriel; Garcia-Louzao, Jose
  5. Turning worries into cognitive performance: Results from an online experiment during Covid By Timothée Demont; Daniela Horta Sáenz; Eva Raiber
  6. Globalization and Firm Performance By Catão, Luis A. V.; de Faria, Pedro; Martins, António; Portela, Miguel
  7. Informational Diversity and Affinity Bias in Team Growth Dynamics By Hoda Heidari; Solon Barocas; Jon Kleinberg; Karen Levy
  8. Measuring the effects of bank remuneration rules: evidence from the UK By Sakalauskaite, Ieva; Harris, Qun
  9. Corporate Culture and Organizational Fragility By Elliott, M.; Golub, B.; Leduc, M. V.

  1. By: Brice Corgnet (Economic Science Institute, Chapman University)
    Abstract: We design a laboratory experiment in which a human or an algorithm decides which of two workers to dismiss. The algorithm automatically dismisses the least productive worker whereas human bosses have full discretion over their decisions. Using performance metrics and questionnaires, we find that fired workers react more negatively to human than to algorithmic decisions in a broad range of tasks. We show that spitefulness exacerbated this negative reaction. Our findings suggest algorithms could help tame negative reactions to dismissals.
    Keywords: Algorithmic dismissals, laboratory experiments, distributive justice, work satisfaction, social preferences
    JEL: C92 D23 D91 M50 O33
    Date: 2023
  2. By: Marco Fongoni (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Daniel Schaefer (JKU - Johannes Kepler University Linz [Linz]); Carl Singleton (UOR - University of Reading)
    Abstract: We develop a model of incomplete employment contracts such that employees have some discretion over effort, which depends on their work morale. Nominal wage cuts have a strong negative effect on morale, while employee involvement in workplace decision-making tends to increase morale. We derive predictions on how these two mechanisms affect the decisions of firms to cut nominal wages. Using matched employer-employee and manager survey data from Great Britain, we find support for our model: nominal wage cuts are only half as likely when managers think that employees have some discretion over how they perform their work, but this reduced likelihood recovers partially when employees are involved in the decision-making process at their workplace.
    Keywords: Employer-employee data, Wage rigidity, Reciprocity, Workplace relations
    Date: 2023–01–19
  3. By: Annekatrin Schrenker (DIW Berlin and FU Berlin)
    Abstract: This paper studies if workers infer from correlation about causal effects in the context of the part-time wage penalty. Differences in hourly pay between full-time and part-time workers are strongly driven by worker selection and systematic sorting. Ignoring these selection effects can lead to biased expectations about the consequences of working part-time on wages (`selection neglect bias'). Based on representative survey data from Germany, I document substantial misperceptions of the part-time wage gap. Workers strongly overestimate how much part-time workers in their occupation earn per hour, whereas they are approximately informed of mean full-time wage rates. Consistent with selection neglect, those who perceive large hourly pay differences between full-time and part-time workers also predict large changes in hourly wages when a given worker switches between full-time and part-time employment. Causal analyses using a survey experiment reveal that providing information about the raw part-time pay gap increases expectations about the full-time wage premium by factor 1.7, suggesting that individuals draw causal conclusions from observed correlations. De-biasing respondents by informing them about the influence of worker characteristics on observed pay gaps mitigates selection neglect. Subjective beliefs about the part-time/full-time wage gap are predictive of planned and actual transitions between full-time and part-time employment, necessitating the prevention of causal misperceptions.
    Keywords: part-time pay gap; wage expectations; selection neglect; causal misperceptions;
    JEL: J31 D83 D84
    Date: 2023–01–23
  4. By: Burdin, Gabriel (Leeds University Business School); Garcia-Louzao, Jose (Bank of Lithuania)
    Abstract: Using detailed administrative data from Spain, we investigate the impact of having an initial work experience in an employee-owned firm (EOF) versus a conventional business on subsequent earnings. We find that young workers' exposure to EOFs at the time of labour market entry reduces earnings by about 8% during the first 15 years in the labour market. The selection of individuals with low initial ability in EOFs does not appear to be a relevant channel. Our results seem to be rather related to differences in job mobility and wage returns to experience. On the one hand, we document lower wage returns to experience acquired in EOFs, although no differences in subsequent career progression in terms of promotions. On the other hand, we find that workers who had their first job in EOFs show a strong attachment to such a business model and are less likely to voluntarily leave their employers. Taken together, our findings suggest the existence of non-pecuniary job attributes offered by EOFs that might compensate for lower lifetime earnings.
    Keywords: employee-owned firms, careers, wages, job mobility
    JEL: J31 J50 J62
    Date: 2023–01
  5. By: Timothée Demont (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Daniela Horta Sáenz (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Eva Raiber (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR)
    Abstract: Worrisome topics, such as climate change, economic crises, or the Covid-19 pandemic, are increasingly present and pervasive due to digital media and social networks. Do such worries affect cognitive performance? The effect of a distressing topic might be very different depending on whether people have the scope and means to cope with the consequences. It can also differ by how performance is rewarded, for instance, if is there a goal that people can focus on. In an online experiment during the Covid-19 pandemic, we test how the cognitive performance of university students responds to topics discussing (i) current mental health issues related to social restrictions or (ii) future labor market uncertainties linked to the economic contraction. Moreover, we study how the response is affected by a performance goal by conditioning payout on reaching a minimum level. We find that the labor market topic increases cognitive performance when performance is motivated by a goal. Conversely, there is no such effect after the mental health topic. We even find a weak negative effect among those mentally vulnerable when payout is not based on reaching a goal. The positive effect is driven by students with larger financial and social resources, pointing at an inequality-widening mechanism.
    Keywords: cognitive performance, financial worries, Covid-19, financial incentives, anxiety, coping behaviors
    Date: 2023–01–16
  6. By: Catão, Luis A. V. (Inter-American Development Bank); de Faria, Pedro (University of Groningen); Martins, António (ISEG); Portela, Miguel (University of Minho)
    Abstract: Using a new panel dataset of about 140 thousand Portuguese firms during 2006-2019, we measure the effects of globalization on firm-level performance along four dimensions: ownership of capital, employment of foreign-seasoned managers, and participation in export and import markets. Once at least one of these channels is active, firms are larger, less leveraged, employ better qualified workers, and pay higher hourly wages. We also uncover a pecking order of effects, with export-market participation having generally larger positive effects on productivity and negative effects on unit labor costs. All four channels interact, sometimes complementing, sometimes substituting one another. For instance, foreign ownership boosts exports at the extensive margin while being an importer and/or having a foreign-experienced manager help at the intensive margin; conversely, the marginal productivity gains of foreign-ownership are greatly reduced when the firm is already an exporter. Breaking down the effects of each channel by firm size, we show that smaller firms stand the most to gain from export market participation and foreign-ownership.
    Keywords: foreign direct investment, entrepreneurship, trade, productivity, wages, labor costs, leverage, firm size distribution
    JEL: D22 D24 F23 G34 J3 L20 M10
    Date: 2023–01
  7. By: Hoda Heidari; Solon Barocas; Jon Kleinberg; Karen Levy
    Abstract: Prior work has provided strong evidence that, within organizational settings, teams that bring a diversity of information and perspectives to a task are more effective than teams that do not. If this form of informational diversity confers performance advantages, why do we often see largely homogeneous teams in practice? One canonical argument is that the benefits of informational diversity are in tension with affinity bias. To better understand the impact of this tension on the makeup of teams, we analyze a sequential model of team formation in which individuals care about their team's performance (captured in terms of accurately predicting some future outcome based on a set of features) but experience a cost as a result of interacting with teammates who use different approaches to the prediction task. Our analysis of this simple model reveals a set of subtle behaviors that team-growth dynamics can exhibit: (i) from certain initial team compositions, they can make progress toward better performance but then get stuck partway to optimally diverse teams; while (ii) from other initial compositions, they can also move away from this optimal balance as the majority group tries to crowd out the opinions of the minority. The initial composition of the team can determine whether the dynamics will move toward or away from performance optimality, painting a path-dependent picture of inefficiencies in team compositions. Our results formalize a fundamental limitation of utility-based motivations to drive informational diversity in organizations and hint at interventions that may improve informational diversity and performance simultaneously.
    Date: 2023–01
  8. By: Sakalauskaite, Ieva (Bank of England); Harris, Qun (Bank of England)
    Abstract: In this paper, we study whether and how some of the remuneration rules introduced after the Global Financial Crisis affected bankers’ compensation using a unique regulatory dataset on remuneration in six major UK banks during 2014–19. We find that for bankers most affected by limits on their bonus to fixed pay ratios (the bonus cap), total pay growth did not decrease, but compensation shifted from bonuses to fixed remuneration. We also find some evidence which could indicate that requiring bankers’ bonuses to be deferred for longer periods was correlated with increases in total compensation and a lower proportion of bonuses being deferred.
    Keywords: Remuneration regulation; bonus cap; deferral; bank regulation
    JEL: G21 G28 G38 J33 L51
    Date: 2022–12–19
  9. By: Elliott, M.; Golub, B.; Leduc, M. V.
    Abstract: Complex organizations accomplish tasks through many steps of collaboration among workers. Corporate culture supports collaborations by establishing norms and reducing misunderstandings. Because a strong corporate culture relies on costly, voluntary investments by many workers, we model it as an organizational public good, subject to standard free-riding problems, which become severe in large organizations. Our main finding is that voluntary contributions to culture can nevertheless be sustained, because an organization’s equilibrium productivity is endogenously highly sensitive to individual contributions. However, the completion of complex tasks is then necessarily fragile to small shocks that damage the organization’s culture.
    Keywords: Corporate Culture, fragility, Networks
    Date: 2023–02–05

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