nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2023‒04‒03
nine papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. How should performance signals affect contracts? By Chaigneau, Pierre; Edmans, Alex; Gottlieb, Daniel
  2. Team size and diversity By Brais Alvarez Pereira; Shan Aman-Rana; Alexia Delfino
  3. Robot adoption, worker-firm sorting and wage inequality: Evidence from administrative panel data By Ester Faia; Gianmarco I. P. Ottaviano; Saverio Spinella
  4. Managing Employee Retention Concerns: Evidence from U.S. Census Data By Eva Labro; James D. Omartian
  5. Do Women Expect Wage Cuts for Part-time Work? By Annekatrin Schrenker
  6. Prestige, promotion, and pay By Ferreira, Daniel; Nikolowa, Radoslawa
  7. The interplay of contracts and trust: untangling between- and within-dyad effects By Liwen Wang
  8. Against the Odds! The Tradeoff Between Risk and Incentives is Alive and Well By Brice Corgnet; Roberto Hernan-Gonzalez; Yao Thibaut Kpegli; Adam Zylbersztejn
  9. Robots and the gender pay gap in Europe By Aksoy, Cevat Giray; Özcan, Berkay; Philipp, Julia

  1. By: Chaigneau, Pierre; Edmans, Alex; Gottlieb, Daniel
    Abstract: The informativeness principle states that a contract should depend on informative signals. This paper studies how it should do so. Signals indicating that the output distribution has shifted to the left (e.g., weak industry performance) reduce the threshold for the manager to be paid; those indicating that output is a precise measure of effort (e.g., low volatility) decrease high thresholds and increase low thresholds. Surprisingly, “good” signals of performance need not reduce the threshold. Applying our model to performance-based vesting, we show that performance measures should affect the strike price, rather than the number of vesting options, contrary to practice.
    JEL: D86 G34 G32 J33
    Date: 2022–01–01
  2. By: Brais Alvarez Pereira; Shan Aman-Rana; Alexia Delfino
    Abstract: We analyse the relationship of performance with team diversity and size. We first propose a model with knowledge spillovers in production, which predicts that the effect of team diversity on individual performance increases with team size. We experimentally test the model by randomly assigning students to solve knowledge questions in teams of different sizes, with or without diversity. Our main finding is that the benefit of diversity is increasing in team size. We further show that such benefit is heterogeneous depending on students’ gender and the gender composition of teams. This has implications for how organizations can design their teams to maximize knowledge flows and performance.
    Keywords: Gender, Diversity, Team performance, Information, Communication
    JEL: J1 J15 J16 M50 O15
    Date: 2023
  3. By: Ester Faia; Gianmarco I. P. Ottaviano; Saverio Spinella
    Abstract: Leveraging the geographic dimension of a large administrative panel on employer-employee contracts, we study the impact of robot adoption on wage inequality through changes in worker-firm assortativity. Using recently developed methods to correctly and robustly estimate worker and firm unobserved characteristics, we find that robot adoption increases wage inequality by fostering both horizontal and vertical task specialization across firms. In local economies where robot penetration has been more pronounced, workers performing similar tasks have disproportionately clustered in the same firms ('segregation'). Moreover, such clustering has been characterized by the concentration of higher earners performing more complex tasks in firms paying higher wages ('sorting'). These firms are more productive and poach more aggressively. We rationalize these findings through a simple extension of a well-established class of models with two-sided heterogeneity, on-the-job search, rent sharing and employee Bertrand poaching, where we allow robot adoption to strengthen the complementarities between firm and worker characteristics.
    Keywords: robot adoption, worker-firm sorting, wage inequality, technological change, finite mixture models
    Date: 2023–02–10
  4. By: Eva Labro; James D. Omartian
    Abstract: Using Census microdata on 14, 000 manufacturing plants, we examine how firms man age employee retention concerns in response to local wage pressure. We validate our measure of employee retention concerns by documenting that plants respond with wage increases, and do so more when the employees’ human capital is higher. We doc ument substantial use of non-wage levers in response to retention concerns. Plants shift incentives to increase the likelihood that bonuses can be paid: performance target transparency declines, as does the use of localized performance metrics for bonuses. Furthermore, promotions become more meritocratic, ensuring key employees can be promoted and retained. Lastly, decision-making authority at the plant-level increases, offering more agency to local employees. We find evidence consistent with inequity aversion constraining the response to local wage pressure, and document spillovers in both wage and non-wage reactions across same-firm plants.
    Keywords: Retention concerns, Inequity aversion, Multi-divisional firms
    Date: 2023–02
  5. By: Annekatrin Schrenker
    Abstract: I quantify the perceived changes in hourly wage rates associated with working different hours on the same job for a representative sample of female workers. While part-time working women expect significant hourly wage gains from switching to full-time work - 7% on average - full-time workers expect no effect on current wages when switching to part-time, on average. Perceived pecuniary losses from part-time work are most pronounced among full-time working mothers and women in managerial jobs. Using density forecasts, I document a large uncertainty about the perceived pay gap that correlates with the probability to report extreme wage penalties, as well as with worker characteristics. Comparing beliefs with selectivity-corrected estimates of the objective part-time penalty further indicates that full-time workers on average underestimate part-time wage losses, whereas part-time workers tend to overestimate full-time wage gains.
    Keywords: Expectations, female labor supply, part-time wage gap
    JEL: D84 J22 J31
    Date: 2022
  6. By: Ferreira, Daniel; Nikolowa, Radoslawa
    Abstract: We develop a theory in which financial (and other professional services) firms design career structures to “sell” prestigious jobs to qualified candidates. Firms create less-prestigious entry-level jobs, which serve as currency for employees to pay for the right to compete for the more prestigious jobs. In optimal career structures, entrylevel employees (“associates”) compete for better paid and more prestigious positions (“managing directors” or “partners”). The model provides new implications relating job prestige to compensation, employment, competition, and the size of the financial sector.
    Keywords: job prestige; professional careers; financial service firms
    JEL: F3 G3 R14 J01
    Date: 2023–02–15
  7. By: Liwen Wang (SAFTI - Shenzhen Audencia Financial Technology Institute)
    Abstract: Purpose – Contracts and trust are two prominent governance mechanisms in buyer-supplier exchanges, yet controversy persists regarding the interplay between contracts and trust. This study provides a new perspective to understand the debate by differentiating between- from within-dyad effects of contracts–trust relationships. Design/methodology/approach – Based on survey data of 250 Chinese buyer–supplier relationships collected over two time periods, we employed two-level hierarchical linear modeling (HLM) with repeated measures to test the influence of contracts (trust) on trust (contracts) over time. Findings – We find that for major buyer–supplier exchanges, contracts and trust tend to complement each other when comparing across dyads, but they likely substitute for each other in within-dyad settings. Research limitations/implication – First, to illustrate the dynamic interactions between contracts and trust, we collected data at two time periods and assumed continuous linear relationships of time with both contracts and trust. Further research should collect multiple waves of data to explore the complex, varying changes that arise over time. Second, our findings are based on buyer–supplier relationships in China, whose unique cultural features may limit the generalizability of the results to other settings. Practical implications – Channel managers can structure exchanges by devising detailed contracts that align incentives and demonstrate commitment, which helps build trust in a relationship. Channel managers should also pay special attention to the contingency effects of their transactional and relational features. Originality – This study offers the first explicit test of the dynamic contracts–trust relationship, thereby establishing a more refined understanding of interplay between contracts and trust.
    Keywords: trust, contracts, buyer–supplier exchanges, asset specificity, exchange history
    Date: 2023–01–02
  8. By: Brice Corgnet (Univ Lyon, Emlyon Business School, GATE UMR 5824, F-69130 Ecully, France); Roberto Hernan-Gonzalez (Burgundy School of Business, Dijon, France); Yao Thibaut Kpegli (Univ Lyon, Université Lyon 2, GATE UMR 5824, F-69130 Ecully, France); Adam Zylbersztejn (Univ Lyon, Université Lyon 2, GATE UMR 5824, F-69130 Ecully, France; research fellow at Vistula University Warsaw (AFiBV), Warsaw, Poland)
    Abstract: The risk-incentives tradeoff (RIT) is a fundamental result of principal-agent theory. Yet, empirical evidence has been elusive. This could be due to a lack of robustness of the theory outside of the standard expected utility framework (EUT) or to confounding factors in the empirical tests. First, we theoretically study the existence of RIT under alternative theories: Rank-Dependent Utility (RDU) and Mean-Variance-Skewness (MVS). We show that RIT is remarkably robust under RDU, but not under MVS. Second, we use a novel experimental design that eliminates confounding factors and find evidence for RIT even in the case of risk-seeking agents, which is a distinct prediction of RDU. Our results provide support for the risk-incentives tradeoff and suggest that it applies to a broad range of situations including cases in which agents are risk-seeking (e.g., executive compensation).
    Keywords: Risk-Incentives Tradeoff, Rank-Dependent Utility, Mean-Variance-Skewness, Experiments
    JEL: C92 D23 D86 M54
    Date: 2023
  9. By: Aksoy, Cevat Giray; Özcan, Berkay; Philipp, Julia
    Abstract: Could robotization make the gender pay gap worse? We provide the first large-scale evidence on the impact of industrial robots on the gender pay gap using data from 20 European countries. We show that robot adoption increases both male and female earnings but also increases the gender pay gap. Using an instrumental variable strategy, we find that a ten percent increase in robotization leads to a 1.8% increase in the gender pay gap. These results are driven by countries with high initial levels of gender inequality and can be explained by the fact that men at medium- and high-skill occupations disproportionately benefit from robotization, through a productivity effect. We rule out the possibility that our results are driven by mechanical changes in the gender composition of the workforce.
    Keywords: industrial robots; gender pay gap; automation; Europe
    JEL: J00 J31 J71
    Date: 2021–05–01

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