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on Human Capital and Human Resource Management |
| By: | Björn Bartling; Ernst Fehr; Klaus M. Schmidt |
| Abstract: | Employment contracts give a principal the authority to decide flexibly which task his agent should execute. However, there is a tradeoff, first pointed out by Simon (1951), between flexibility and employer moral hazard. An employment contract allows the principal to adjust the task quickly to the realization of the state of the world, but he may also abuse this flexibility to exploit the agent. We capture this tradeoff in an experimental design and show that principals exhibit a strong preference for the employment contract. However, selfish principals exploit agents in one-shot interactions, inducing them to resist entering into employment contracts. This resistance to employment contracts vanishes if fairness preferences in combination with reputation opportunities keep principals from abusing their power, leading to the widespread, endogenous formation of efficient long-run employment relations. Our results inform the theory of the firm by showing how behavioral forces shape an important transaction cost of integration – the abuse of authority – and by providing an empirical basis for assessing differences between the Marxian and the Coasian view of the firm, as well as Alchian and Demsetz’s (1972) critique of the Coasian approach. |
| Keywords: | Theory of the firm, transaction cost economics, authority, power abuse, employment relation, fairness, reputation |
| JEL: | C91 D23 D86 M5 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:098&r=hrm |
| By: | Alain Cohn; Ernst Fehr; Lorenz Goette |
| Abstract: | The presence of workers who reciprocate higher wages with greater effort can have important consequences for labor markets. Knowledge about the determinants of reciprocal effort choices is, however, incomplete. We investigate the role of fairness perceptions and social preferences in workers’ performance in a field experiment in which workers were hired for a one-time job. We show that workers who perceive being underpaid at the base wage increase their performance if the hourly wage increases, while those who feel adequately paid or overpaid at the base wage do not change their performance. Moreover, we find that only workers who display positive reciprocity in a lab experiment show reciprocal performance responses in the field, while workers who lack positive reciprocity in the lab do not respond to the wage increase even if they feel underpaid at the base wage. Our findings suggest that fairness perceptions and social preferences are key in workers’ performance response to a wage increase. They are the first direct evidence of the fair-wage effort hypothesis in the field and also help interpret previous contradictory findings in the literature. |
| Keywords: | Fairness perception, positive reciprocity, field experiment, wage increase |
| JEL: | C93 J31 M52 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:107&r=hrm |
| By: | Gürtler, Marc; Gürtler, Oliver |
| Abstract: | We investigate the effect of employee heterogeneity on the incentive to put forth effort in a market-based tournament. Employers use the tournament's outcome to estimate employees' abilities and accordingly condition their wage offers. Employees put forth effort, because by doing so they increase the probability of outperforming the rival, thereby increasing their ability assessment and thus the wage offer. We demonstrate that the tournament outcome provides more information about employees' abilities in case they are heterogeneous. Thus, employees get a higher incentive to affect the tournament outcome, and employers find it optimal to hire heterogeneous contestants. -- |
| Keywords: | tournament,competitive labor market,heterogeneity,learning |
| JEL: | D83 J24 J31 M51 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tbsifw:if42v1&r=hrm |
| By: | Ernst Fehr; Holger Herz; Tom Wilkening |
| Abstract: | Authority and power permeate political, social, and economic life, but empirical knowledge about the motivational origins and consequences of authority is limited. We study the motivation and incentive effects of authority experimentally in an authority- delegation game. Individuals often retain authority even when its delegation is in their material interest - suggesting that authority has non-pecuniary consequences for utility. Authority also leads to over-provision of effort by the controlling parties, while a large percentage of subordinates under-provide effort despite pecuniary incentives to the contrary. Authority thus has important motivational consequences that exacerbate the inefficiencies arising from suboptimal delegation choices. |
| Keywords: | Organizational behavior, incentives, experiments and contracts |
| JEL: | C92 D83 D23 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:099&r=hrm |
| By: | Becker, Sascha O. (CAGE @ Warwick University ; CEPR ; CESifo ; Ifo and IZA); Hvide, Hans K. (University of Bergen ; CEPR and University of Aberdeen) |
| Abstract: | In the large literature on firm performance, economists have given little attention to entrepreneurs. We use deaths of more than 500 entrepreneurs as a source of exogenous variation, and ask whether this variation can explain shifts in firm performance. Using longitudinal data, we find large and sustained effects of en- trepreneurs at all levels of the performance distribution. Entrepreneurs strongly affect firm growth patterns of both very young firms and for firms that have begun to mature. We do not find signficant differences between small and larger firms, family and non-family firms, nor between firms located in urban and rural areas, but we do find stronger effects for founders with high human capital. Overall, the results suggest that an often overlooked factor – individual entrepreneurs – plays a large role in affecting firm performance. Key words: entrepreneurship ; firm performance ; human capital. JEL classification: D21 ; D24 ; J23 ; L11 ; L25 ; G39 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1002&r=hrm |
| By: | Vincenzo Scoppa (Department of Economics, Statistics and FInance, University of Calabria); Daniela Vuri (Department of Economics and Finance, University of Rome "Tor Vergata") |
| Abstract: | Efficiency wages theories argue that the threat of firing, coupled with a high unemployment rate, is a mechanism that discourages employee shirking in asymmetric information contexts. Our empirical analysis aims to verify the role of unemployment as a worker discipline device, considering the different degree of job security offered by the Italian Employment Protection Legislation to workers employed in small and large firms. We use a panel of administrative data (WHIP) and consider sickness absences as an empirical proxy for employee shirking. Controlling for a number of individual and firm characteristics, we investigate the relationship between worker's absences and local unemployment rate (at the provincial level). We find a strong negative impact of unemployment on absenteeism rate, which is considerable larger in small firms due to a significantly lower protection from dismissals in these firms. We also find that workers who are absent more frequently face higher risks of dismissal. As an indirect test of the role of unemployment as worker's discipline device we show that public sector employees, almost impossible to fire, do not react to the local unemployment. |
| Keywords: | Shirking; Absenteeism; Employment Protection Legislation; Unemployment. |
| JEL: | J41 M51 J45 |
| Date: | 2013–01–07 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:257&r=hrm |
| By: | Moritz Ritter (Department of Economics, Temple University) |
| Abstract: | I document that workers in newly tradable service occupations possess more occupation-specific human capital and are more highly educated than workers in previously tradable occupations. Motivated by this observation, I develop a dynamic equilibrium model with labor market frictions and specific human capital to study the labor adjustment process after a trade shock. When calibrated to match the increase in U.S. trade between 1990 and 2010, the model suggests that (1) output increases immediately after a trade shock and converges quickly to the steady state; (2) labor market institutions play a larger role in the adjustment process than specific human capital; (3) the short run distributional effects are small if the labor market is flexible, even in the presence of specific human capital. |
| Keywords: | Offshoring, Sectoral Labor Reallocation, Human Capital |
| JEL: | E24 F16 J24 J62 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:tem:wpaper:1207&r=hrm |
| By: | Diego Restuccia; Guillaume Vandenbroucke |
| Abstract: | Consider the following facts. In 1950 the richest ten-percent of countries attained an average of 8.1 years of schooling whereas the poorest ten-percent of countries attained 1.3 years, a 6-fold difference. By 2005, the difference in schooling declined to 2-fold. The fact is that schooling has increased faster in poor than in rich countries. What explains educational attainment differences across countries and their evolution over time? We develop an otherwise standard model of human capital accumulation with two novel but important features: non-homotetic preferences and an operating labor supply margin. We use the model to assess the quantitative contribution of productivity and life expectancy differences across countries in explaining educational attainment. Calibrating the parameters of the model to reproduce the historical time-series data for the United States, we find that the model accounts for 96 percent of the difference in schooling levels between rich and poor countries in 1950 and 89 percent of the increase in schooling over time in poor countries. The model generates a faster increase in schooling in poor than in rich countries consistent with the data. These results highlight the role of development in education and thus have important implications for educational policy. |
| Keywords: | schooling, productivity, life expectancy, education policy, labor supply |
| JEL: | O1 O4 E24 J22 J24 |
| Date: | 2013–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-469&r=hrm |
| By: | Naiditch, Claire (ESSEC Business School); Vranceanu, Radu (ESSEC Business School) |
| Abstract: | This paper proposes a two-country model of migration in a transferable skill sector, where workers'education is provided free of charge by governments. We study firstly the non-cooperative equilibrium where the poor country decides on the education level and the rich country decides on the quota of skilled migrants. Additional migration raises earnings prospects in the source country and attracts more talented people to that profession, what we refer to as the sector-specific brain gain effect. This game presents a single stable equilibrium with positive migration. Compared to the cooperative equilibrium, in the noncooperative equilibrium the poor country systematically under-invests in education. Whether migration is too strong or too weak depends on the size of the brain gain effect. Furthermore, the size of the welfare gain to be reaped by moving from non-cooperative to the cooperative organization of migration also depends on the strength of the sector-specific brain gain. |
| Keywords: | High-skill migration; Brain-gain; Public education; Human capital; Government |
| JEL: | F22 H11 I25 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:essewp:dr-13001&r=hrm |
| By: | Devereux, Paul J; Hart, Robert A; Roberts, J Elizabeth |
| Abstract: | We show that the distinction between job spells and employer spells matters for returns to tenure. Employer spells encompass between-job wage movements linked to promotions or demotions while job spells don't. Using a 1% sample of the British workforce over the period 1975-2010, we find that a significant proportion of the return to employer tenure arises due to job changes within employer spells. Conditional on tenure with employer, the return to job tenure is negative. This suggests that any positive effects of job-specific human capital on wage growth within jobs are outweighed by the effects of job changes within firms. |
| Keywords: | wage-tenure profiles; employer spells; Job spells |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:stl:stledp:2013-01&r=hrm |
| By: | Jonathan R. Clark; Robert S. Huckman; Bradley R. Staats |
| Abstract: | The ongoing fragmentation of work has resulted in a narrowing of tasks into smaller pieces that can be sent outside the organization and, in many instances, around the world. This trend is shifting the boundaries of organizations and leading to increased outsourcing. Though the consolidation of volume may lead to productivity improvement, little is known about how this shift toward outsourcing influences learning by providers of outsourced services. When producing output, the content of the knowledge gained can vary from one unit to the next. One dimension along which output can vary —a dimension with particular relevance in outsourcing—is the end customer for whom it is produced. The performance benefits of such customer experience remain largely unexamined. We explore this dimension of volume-based learning in a setting where doctors at an outsourcing firm complete radiological reads for hospital customers. We examine more than 2.7 million cases read by 97 radiologists for 1,431 customers and find evidence supporting the benefits of customer-specific experience accumulated by individual radiologists. Additionally, we find that variety in an individual’s customer experience may increase the rate of individual learning from customer-specific experience for a focal task. Finally, we find that the level of experience with a customer for the entire outsourcing firm also yields learning and that the degree of customer depth moderates the impact of customer-specific experience at the individual level. We discuss the implications of our results for the study of learning as well as for providers and consumers of outsourced services. |
| JEL: | I1 J24 L2 M2 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18723&r=hrm |
| By: | Alina Sorgner; Michael Fritsch |
| Abstract: | Often, a person will become an entrepreneur only after a period of dependent employment, suggesting that occupational choices precede entrepreneurial choices. We investigate the relationship between occupational choice and self-employment. The findings suggest that the occupational choice of future entrepreneurs at the time of labor market entry is partly guided by a taste for skill variety, the prospect of high<br /> earnings, and occupational earnings risk. Entrepreneurial intentions may also emerge after gaining work experience in a chosen occupation. We find that occupations characterized by high levels of unemployment and earnings risk, relatively many job opportunities, and high self-employment rates foster the founding of an own business. Also, people who fail to achieve an occupation-specific income have a tendency for selfemployment. |
| Keywords: | Entrepreneurial choice, occupation-specific determinants of entrepreneurship, risk preferences, taste for variety |
| JEL: | L26 J24 D01 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp533&r=hrm |
| By: | Vincenzo Scoppa (Dipartimento di Scienze Economiche, Statistiche e Finanziarie, Università della Calabria) |
| Abstract: | We investigate the role of fatigue in soccer (football). Although this issue is important for the “productivity” of players and the optimal organization of national and international championships, there is a lack of empirical evidence. We use data on all the matches played by national teams in all the tournaments of the FIFA Soccer World Cup (from 1930 to 2010) and the UEFA European Football Championship (from 1960 to 2012). We relate team performance (in terms of goal difference and points gained) to the respective days of rests that teams have had after their previous match, controlling for several measures of teams’ abilities. Using different estimators we show that, under the current structure of major international tournaments, there are no relevant effects of enjoying different days of rest on team performance. |
| Keywords: | Sports Economics, Soccer, Fatigue, Team Performance, World Cup, European Football Championship |
| JEL: | L83 J4 J22 L25 C29 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:clb:wpaper:201301&r=hrm |
| By: | John P. Conley (Vanderbilt University); Ali Sina Önder (Uppsala University); Benno Torgler (Queensland University of Technology and EBS Business School) |
| Abstract: | Using life cycle publication data of 9,368 economics PhD graduates from 127 U.S. institutions, we investigate how unemployment in the U.S. economy prior to starting graduate studies and at the time of entry into the academic job market affect economics PhD graduates’ research productivity. We analyze the period between 1987 and 1996 and find that favorable conditions at the time of academic job search have a positive effect on research productivity (measured in numbers of publications) for both male and female graduates. On the other hand, unfavourable employment conditions at the time of entry into graduate school affects female research productivity negatively, but male productivity positively. These findings are consistent with the notion that men and women differ in their perception of risk in high skill occupations. In the specific context of research-active occupations that require high skill and costly investment in human capital, an ex post poor return on undergraduate educational investment may cause women to opt for less risky and secure occupations while men seem more likely to “double down” on their investment in human capital. Further investigation, however, shows that additional factors may also be at work. |
| Keywords: | Research Productivity, Human Capital, Graduate Education, Gender Differences |
| JEL: | J16 J24 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2012.86&r=hrm |
| By: | Brad J. Hershbein (W.E. Upjohn Institute for Employment Research) |
| Abstract: | Recent studies have found a large earnings premium to attending a more selective college, but the mechanisms underlying this premium have received little attention and remain unclear. In order to shed light on this question, I develop a multidimensional signaling model relying on college grades and selectivity that rationalizes students’ choices of effort and firms’ wage-setting behavior. The model is then used to produce predictions of how the interaction of the signals should be related to wages, namely that the return on college GPA should fall the more selective the institution attended. Using five data sets that span the early 1960s through the late 2000s, I show that the data support the predictions of the signaling model, with support growing stronger over time as college sorting by ability has increased. The findings imply that return to college selectivity depends on GPA, something previously not recognized in the literature, and they can rationalize why employers learn more quickly about college graduates’ productivity than less educated workers’. |
| Keywords: | college graduates, signaling, school quality, grade point average |
| JEL: | I20 I21 J31 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:13-190&r=hrm |
| By: | Roy, Satyaki |
| Abstract: | This paper argues that per capita income in all states in India increased in the past four decades but in fact no sign of convergence could be visible as it was expected in the context of liberalizing markets. The paper shows that disparities in terms of income were higher within the rural areas across states compared to their urban counterparts. This might be a reflection of a converging trend in terms of opportunities available in the cities and towns across states. The paper identifies a declining gap in terms of various human development indices such as literacy rate, general enrollment ratio and life expectancy at birth across states and shows that gaps also declined between the rural and urban segments within states. The paper however argues that performance in terms of various dimensions of human development increases with income but at a declining rate which is indicative of the fact that per capita income at higher levels becomes less important in generating gains in terms of basic human development indices. Finally, the paper compares the performance of the states in terms of human development over the years including that computed from the latest available data and shows that the relative positions of the states did not undergo much change over the years. |
| Keywords: | growth; per capita income; human development |
| JEL: | I21 I10 I32 |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:43841&r=hrm |
| By: | Kohei Kawamura (University of Edinburgh) and Jozsef Sakovics(University of Edinburgh) |
| Abstract: | We analyse a labour matching model with wage posting, where ?- refl?ecting institutional constraints - firms cannot differentiate their wage offers within certain subsets of workers. Inter alia, we fi?nd that the presence of impersonal wage offers leads to wage compression, which propagates to the wages for high productivity workers who receive personalised offers. |
| Date: | 2013–01–16 |
| URL: | http://d.repec.org/n?u=RePEc:edn:esedps:215&r=hrm |