|
on Human Capital and Human Resource Management |
| By: | Brian Bell; John Van Reenen |
| Abstract: | Would moving to relative performance contracts improve the alignment between CEO pay and performance? To address this we exploit the large rise in relative performance awards and the share of equity pay in the UK over the last two decades. Using new employer-employee matched datasets we find that the CEO pay-performance relationship remains asymmetric: pay responds more to increases in shareholders’ return performance than to decreases. Further, this asymmetry is stronger when governance appears weak. Second, there is substantial “pay-for-luck” as remuneration increases with random positive shocks, even when the CEO has equity awards that explicitly condition on firm performance relative to peer firms in the same sector. A reason why relative performance pay fails to deal with pay for luck is that CEOs who fail to meet the terms of their past performance awards are able to obtain more generous new equity rewards in the future. Moreover, this “compensation effect” is stronger when the firm has weak corporate governance. These findings suggest that reforms to the formal structure of CEO pay contracts are unlikely to align incentives in the absence of strong shareholder governance. |
| JEL: | J33 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22407&r=hrm |
| By: | Ian D. Gow; Steven N. Kaplan; David F. Larcker; Anastasia A. Zakolyukina |
| Abstract: | Based on two samples of high quality personality data for chief executive officers (CEOs), we use linguistic features extracted from conferences calls and statistical learning techniques to develop a measure of CEO personality in terms of the Big Five traits: agreeableness, conscientiousness, extraversion, neuroticism, and openness to experience. These personality measures have strong out-of-sample predictive performance and are stable over time. Our measures of the Big Five personality traits are associated with financing choices, investment choices and firm operating performance. |
| JEL: | D22 D23 G3 G34 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22435&r=hrm |
| By: | Philip Brookins; Jennifer Brown; Dmitry Ryvkin |
| Abstract: | Incentive schemes that reward participants based on their relative performance are often thought to be particularly risk-inducing. Using a novel, real-effort task experiment in the laboratory, we find that the relationship between incentives and risk-taking is more nuanced and depends critically on the availability of information about peers’ strategies and outcomes. Indeed, we find that when no peer information is available, relative rewards schemes are associated with significantly less risk-taking than non-competitive rewards. In contrast, when decision-makers receive information about their peers’ actions and/or outcomes, relative incentive schemes are associated with more risk-taking than non-competitive schemes. The nature of the feedback—whether subjects receive information about peers’ strategies, outcomes, or both—also affects risk-taking. We find no evidence that competitors imitate their peers when they face only feedback about other subjects’ risk-taking strategies. However, decision-makers take more risk when they see the gaps between their performance score and their peers’ scores grow. Combined feedback about peers’ strategies and performance—from which subjects may assess the overall relationship between risk-taking and success—is associated with more risk-taking when rewards are based on relative performance; we find no similar effect for non-competitive rewards. |
| JEL: | C72 C91 C92 D81 G17 M52 |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22486&r=hrm |
| By: | Coviello, Decio; Moretti, Luigi; Spagnolo, Giancarlo; Valbonesi, Paola |
| Abstract: | Disputes over penalties for breaching a contract are often resolved in court. A simple model illustrates how inefficient courts can sway public buyers from enforcing a penalty for late delivery in order to avoid litigation, therefore inducing sellers to delay contract delivery. By using a large dataset on Italian public procurement, we empirically study the effects of court inefficiency on public work performance. We find that where courts are inefficient: i) public works are delivered with longer delays; ii) delays increase for more valuable contracts; iii) contracts are more often awarded to larger suppliers; and iv) a higher share of the payment is postponed after delivery. Other interpretations receive less support from the data. |
| Keywords: | Court efficiency; public procurement; time incentives; performance in contract execution; delay; litigation; enforcement cost. |
| JEL: | H41 H57 K41 |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11426&r=hrm |
| By: | Friedericke von Haaren-Giebel |
| Abstract: | This paper assesses educational attainment of immigrant children, in particular evaluating whether naturalised parents invest more in their children’s human capital than non-naturalised parents. Findings of the literature indicate that citizenship is associated with lower return migration probability. Since the returns to investments in (country-specific) human capital increase with the duration of residence, naturalised parents may have more incentives to invest in the educational success of their children. I exploit a natural experiment that took place in Germany in the year 2000 that reduced the required years of residence for naturalisation from 15 to 8 and therefore exogenously increased naturalisation. Multivariate estimations (based on the German Socio-Economic Panel) show a positive and significant correlation between parents’ citizenship status and their children’s educational attainment. Results of difference-in-differences and instrumental variable models are also positive but not significant. |
| Keywords: | Citizenship, integration, education, SOEP |
| JEL: | J15 J24 I24 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp854&r=hrm |
| By: | Emily Breza; Supreet Kaur; Yogita Shamdasani |
| Abstract: | The idea that worker utility is affected by co-worker wages has potentially broad labor market implications. In a month-long experiment with Indian manufacturing workers, we randomize whether co-workers within production units receive the same flat daily wage or different wages (according to baseline productivity rank). For a given absolute wage, pay inequality reduces output and attendance by 0.24 standard deviations and 12%, respectively. These effects strengthen in later weeks. Pay disparity also lowers co-workers’ ability to cooperate in their self-interest. However, when workers can clearly observe productivity differences, pay inequality has no discernible effect on output, attendance, or group cohesion. |
| JEL: | D03 E24 J3 O15 |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22491&r=hrm |
| By: | Grace Lordan; Jörn-Steffen Pischke |
| Abstract: | Occupational segregation and pay gaps by gender remain large while many of the constraints traditionally believed to be responsible for these gaps have weakened over time. Here, we explore the possibility that women and men have different tastes for the content of the work they do. We run regressions of job satisfaction on the share of males in an occupation. Overall, there is a strong negative relationship between female satisfaction and the share of males. This relationship is fairly stable across different specifications and contexts, and the magnitude of the association is not attenuated by personal characteristics or other occupation averages. Notably, the effect is muted for women but largely unchanged for men when we include three measures that proxy the content and context of the work in an occupation, which we label 'people,' 'brains,' and 'brawn.' These results suggest that women may care more about job content, and this is a possible factor preventing them from entering some male dominated professions. We continue to find a strong negative relationship between female satisfaction and the occupation level share of males in a separate analysis that includes share of males in the firm. This suggests that we are not just picking up differences in the work environment, although these seem to play an independent and important role as well. |
| Keywords: | occupational choice, job content, gender, preferences |
| JEL: | J16 J4 |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1446&r=hrm |
| By: | Stefano Gagliarducci; M. Daniele Paserman |
| Abstract: | This paper uses data on bill sponsorship and cosponsorship in the U.S. House of Representatives to estimate gender differences in cooperative behavior. We employ a number of econometric methodologies to address the potential selection of female representatives into electoral districts with distinct preferences for cooperativeness, including regression discontinuity and matching. After accounting for selection, we find that among Democrats there is no significant gender gap in the number of cosponsors recruited, but women-sponsored bills tend to have fewer cosponsors from the opposite party. On the other hand, we find robust evidence that Republican women recruit more cosponsors and attract more bipartisan support on the bills that they sponsor. This is particularly true on bills that address issues more relevant for women, over which female Republicans have possibly preferences that are closer to those of Democrats. We interpret these results as evidence that cooperation is mostly driven by a commonality of interest, rather than gender per se. |
| JEL: | D70 D72 H50 J16 M50 |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22488&r=hrm |