nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2023‒04‒24
seven papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. The Impact of Relative CEO Pay on Employee Productivity By Afzali, Aaron; Oxelheim, Lars; Randøy, Trond; Paulo Vieito, João
  2. Is Pay Transparency Good? By Zoe B. Cullen
  3. Persuaded Search By Teddy Mekonnen; Zeky Murra-Anton; Bobak Pakzad-Hurson
  4. CSR and Firm Survival: Evidence from the Climate and Pandemic Crises By Thomas J. Chemmanur; Dimitrios Gounopoulos; Panagiotis Koutroumpis; Yu Zhang
  5. Using Genes to Explore the Effects of Cognitive and Non-cognitive Skills on Education and Labor Market Outcomes By Thomas Buser; Rafael Ahlskog; Magnus Johannesson; Philipp Koellinger; Sven Oskarsson
  6. How Does Unethical Behavior Spread? Gender Matters! By Kim L. Böhm; Sebastian J. Goerg; Lilia Wasserka-Zhurakhovska; Lilia Zhurakhovska
  7. Working Longer, Working Stronger? The Forward-Looking Effects of Increasing the Retirement Age on (Un)employment Behaviour By Niklas Gohl

  1. By: Afzali, Aaron (Hanken School of Economics); Oxelheim, Lars (School of Business and Law, University of Agder, Norway); Randøy, Trond (School of Business and Law, University of Agder, Norway); Paulo Vieito, João (Polytechnic Institute of Viana do Castelo, School of Business Studies, Portugal)
    Abstract: In this study, we examine the relationship between within-firm pay inequality and employee productivity. We use hand-collected data on a sample of S&P 1500 companies from 2018-2022 and find a concave relationship between the relative CEO pay and employee productivity. Consistent with tournament theory, we show that the pay gap between the CEO and the Vice Presidents initially positively affects employee productivity. However, this positive effect only works up to a certain level, at which - as expressed by the CEO-employee pay ratio - employee discontent initiates a fall in firm-level productivity. We identify this tipping point as the point at which CEO pay exceeds the median worker’s pay by a factor of 40. The average CEO-employee pay ratio in our sample is 193:1, suggesting that most firms could have avoided a fall in productivity by reducing their CEO-employee pay ratio. Our results remain robust after controlling for endogeneity. From a public policy perspective, our findings pave the way for corporate self-regulation of CEO pay to avoid politically imposed hard laws.
    Keywords: CEO pay; CEO pay-employee ratio; Employee productivity; Tournament incentives
    JEL: G18 G32 G34 J24 J33 M12
    Date: 2023–04–05
  2. By: Zoe B. Cullen
    Abstract: Countries around the world are enacting pay transparency policies to combat pay discrimination. 71% of OECD countries have done so since 2000. Most are enacting transparency horizontally, revealing pay between co-workers of similar seniority within a firm. While these policies have narrowed co-worker wage gaps, they have also lead to counterproductive peer comparisons and caused employers to bargain more aggressively, lowering average wages. Other pay transparency policies, without directly targeting discrimination, have benefited workers by addressing broader information frictions in the labor market. Vertical pay transparency policies reveal to workers pay differences across different levels of seniority. Empirical evidence suggests these policies can lead to more accurate and more optimistic beliefs about earnings potential, increasing employee motivation and productivity. Cross-firm pay transparency policies reveal wage differences across employers. These policies have encouraged workers to seek jobs at higher paying firms, negotiate higher pay, and sharpened wage competition between employers. We discuss the evidence on pay transparency’s effects, and open questions.
    JEL: J08 J31 J78
    Date: 2023–03
  3. By: Teddy Mekonnen; Zeky Murra-Anton; Bobak Pakzad-Hurson
    Abstract: We consider a sequential search environment in which the searching agent does not observe the quality of goods. The agent can contract with a profit-maximizing principal who sells a signal about a good's quality but cannot commit to future contracts. The agent is willing to pay a high price for a more informative signal today, but an agent who anticipates high prices in the future is less likely to continue searching due to a low continuation value, thereby reducing the principal's future profits. We show that there is an essentially unique stationary equilibrium in which the principal (i) induces the socially efficient stopping rule, (ii) fully extracts the surplus generated from search, and (iii) persuades the agent against settling for marginal quality goods, thus extending the duration of rent extraction. Our results demonstrate that the principal would not gain from long-term commitment power or considering complicated, non-stationary contracts.
    Date: 2023–03
  4. By: Thomas J. Chemmanur (Carroll School of Management); Dimitrios Gounopoulos (University of Bath); Panagiotis Koutroumpis (Queen Mary University of London); Yu Zhang (School of Economics, University College Dublin)
    Abstract: We analyse the relationship between the extent of a firm’s corporate social responsibility (CSR) and its long-term survival probability. We conjecture that a better CSR rating is associated with a lower probability of corporate failure and a longer survival period. Consistent with this, we document that four CSR dimensions (environment, community, employee relations, and product) out of six are positively related to firms’ survival probability. The positive association between CSR ratings and firm survival is stronger for firms operating in more competitive industries and those with weaker governance. We find that a firm’s engagement in CSR activities is particularly crucial for firm survival during pandemics and under adverse climate conditions. We establish causality in the relation between a firm’s CSR activities and its survival probability using instrumental variable (IV) and Heckman twostep analyses. Finally, we find that better financial performance, less stringent financial constraints, greater managerial discipline, and enhanced labor productivity are some of the channels through which firms engaging in more CSR activity achieve longer survival times.
    Keywords: Corporate Social Responsibility, Climate Change, Pandemic Uncertainty, Firm Survival, Corporate Governance
    JEL: G30 G41 M14
    Date: 2022–01–28
  5. By: Thomas Buser (University of Amsterdam, Tinbergen Institute); Rafael Ahlskog (Department of Government, Uppsala University); Magnus Johannesson (Stockholm School of Economics); Philipp Koellinger (La Follette School of Public Affairs, University of Wisconsin Madison); Sven Oskarsson (Department of Government, Uppsala University)
    Abstract: A large literature establishes that cognitive and non-cognitive skills are strongly correlated with educational attainment and professional achievement. Isolating the causal effects of these traits on career outcomes is made difficult by reverse causality and selection issues. We suggest a different approach: instead of using direct measures of individual traits, we use differences between individuals in the presence of genetic variants that are associated with differences in skills and personality traits. Genes are fixed over the life cycle and genetic differences between full siblings are random, making it possible to establish the causal effects of within-family genetic variation. We link genetic data from individuals in the Swedish Twin Registry to government registry data and find evidence for causal effects of genetic differences linked to cognitive skills, personality traits, and economic preferences on professional achievement and educational attainment. Our results also demonstrate that education and labor market outcomes are partially the result of a genetic lottery
    Keywords: personality traits, economic preferences, cognitive skills, labor markets, education, polygenic indices
    JEL: I26 J24 D91
    Date: 2021–10–07
  6. By: Kim L. Böhm; Sebastian J. Goerg; Lilia Wasserka-Zhurakhovska; Lilia Zhurakhovska
    Abstract: Using an online experiment with two distinct dishonesty games, we analyze how dishonesty in men and women is influenced by either thinking or learning about the dishonesty of others in a related, but different situation. Thinking is induced by eliciting a belief about others’ dishonesty in a different game. We find that such belief elicitation (1) increases males’ (but not females’) dishonesty and (2) has no influence on participants’ beliefs about the dishonesty of others in the game that they themselves play. Learning is induced by receiving a signal about the actual honest or dishonest choices of others in a different game. We find that the level of unethical behavior provided in such a signal (1) increases females’ (but not males’) dishonesty and (2) is positively correlated with participants’ beliefs about the dishonesty of others in the game that they themselves play. We conclude that gender matters when examining how unethical behavior spreads. Both genders update their beliefs about others’ dishonesty in the same way when presented with information about others’ choices, but dishonesty in men is triggered by merely thinking about others’ dishonesty, while women only respond to actual information on others’ dishonesty.
    Keywords: dishonesty, unethical behaviour, thinking and learning about other’s dishonesty, gender, experiment
    JEL: C90 D01 D80 D91
    Date: 2023
  7. By: Niklas Gohl
    Abstract: Leveraging two cohort-specific pension reforms, this paper estimates the forward-looking effects of an exogenous increase in the working horizon on (un)employment behaviour for individuals with a long remaining statutory working life. Using difference-in-differences and regression discontinuity approaches based on administrative and survey data, I show that a longer legal working horizon increases individuals’ subjective expectations about the length of their work life, raises the probability of employment, decreases the probability of unemployment, and increases the intensity of job search among the unemployed. Heterogeneity analyses show that the demonstrated employment effects are strongest for women and in occupations with comparatively low physical intensity, i.e., occupations that can be performed at older ages.
    Keywords: retirement policies, employment, DiD
    JEL: J24 J26 H21
    Date: 2023–03–28

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