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on Human Capital and Human Resource Management |
| By: | Le Yaouanq, Yves; Schwardmann, Peter |
| Abstract: | How can naiveté about present bias persist despite experience? To answer this question, our experiment investigates participants' ability to learn from their own behavior. Participants decide how much to work on a real effort task on two predetermined dates. In the week preceding each work date, they state their commitment preferences and predictions of future effort. While we find that participants are present biased and initially naive about their bias, our methodology enables us to establish that they are Bayesian in how they learn from their experience at the first work date. A treatment in which we vary the nature of the task at the second date further shows that learning is unencumbered by a change in environment. Our results suggest that persistent naiveté cannot be explained by a fundamental inferential bias. At the same time, we find that participants initially underestimate the information that their experience will provide - a bias that may lead to underinvestment in experimentation and a failure to activate self-regulation mechanisms. |
| Keywords: | Bayesian updating; learning; Naivete; present bias |
| JEL: | C91 D83 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13510&r=all |
| By: | John List; Fatemeh Momeni |
| Abstract: | We use a natural field experiment in which we hired over 2000 workers from an online labor market to explore how upfront payment affects worker motivation and misbehavior on the job. We start with a simple theory that shows paying upfront can increase misbehavior through reducing the perceived costs of cheating, but it can decrease misbehavior through generating a gift-exchange effect. Motivated by the theory, we designed a task that provided workers with opportunities to reciprocate or misbehave. A unique aspect of our design is that we are permitted an opportunity to measure the curvature of the gift-exchange value of the upfront payment. Our results suggest paying workers upfront induces a gift-exchange effect that is concave in the share of total wage paid upfront. Moreover, the impact is strong enough to suggest that small upfront payments are a cost-effective means for an employer to curb employee misbehavior. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:feb:natura:00665&r=all |
| By: | Matthias Efing; Harald Hau; Patrick Kampkötter; Jean-Charles Rochet |
| Abstract: | We argue that risk sharing motivates the bank-wide structure of bonus pay. In the presence of financial frictions that make external financing costly, the optimal contract between shareholders and employees involves some degree of risk sharing whereby bonus pay partially absorbs earnings shocks. Using payroll data for 1:26 million employee-years in all functional divisions of Austrian, German, and Swiss banks, we uncover several empirical patterns in bonus pay that are difficult to rationalize with incentive theories of bonus pay - but support an important risk sharing motive. In particular, bonuses respond to performance shocks that are outside the control of employees because they originate in other bank divisions or even outside the bank. |
| Keywords: | banker compensation, risk sharing, bonus pay, operating leverage |
| JEL: | G20 G21 D22 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7495&r=all |
| By: | Dessein, Wouter; Prat, Andrea |
| Abstract: | We argue that economists have studied the role of management from three perspectives: contingency theory (CT), an organization-centric empirical approach (OC), and a leader-centric empirical approach (LC). To reconcile these three perspectives, we augment a standard dynamic firm model with organizational capital, an intangible, slow-moving, productive asset that can only be produced with the direct input of the firm's leadership and that is subject to an agency problem. We characterize the steady state of an economy with imperfect governance, and show that it rationalizes key findings of CT, OC, and LC, as well as generating a number of new predictions on performance, management practices, CEO behavior, CEO compensation, and governance. |
| Keywords: | CEO; Management; Organizational Capital |
| JEL: | L22 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13513&r=all |
| By: | Mahmud, Minhaj (Bangladesh Institute of Development Studies (BIDS)); Gutierrez, Italo A. (RAND); Kumar, Krishna B. (RAND); Nataraj, Shanthi (RAND) |
| Abstract: | Using a choice experiment among 2,000 workers in Bangladesh, we to elicit willingness to pay (WTP) for specific job benefits typically associated with formal employment. We find that workers value job stability the most; the average worker would be willing to forego a 27 percent increase in monthly income in order to obtain a 1-year written contract (relative to no contract), or to forego a 12 percent increase to obtain thirty days of termination notice. On average, government workers place a higher value on contracts than do private sector employees, while casual workers particularly value higher pay. Our use of choice experiments to overcome the challenges associated with estimating WTP for specific job benefits from hedonic wage regressions or from observed job transitions is of interest in its own right, especially in a developing country context where data on worker transitions are unavailable and many workers are informally employed. |
| Keywords: | informality, worker benefits, discrete choice experiments |
| JEL: | J32 J81 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12121&r=all |
| By: | Raphael Flepp (Department of Business Administration, University of Zurich); Egon Franck (Department of Business Administration, University of Zurich) |
| Abstract: | In this paper, we account for boards’ misperceptions when replacing a top manager by differentiating between managerial turnovers following actual poor performance and managerial turnovers following seemingly poor performance due to bad luck in order to investigate their subsequent effects on performance. We focus on managerial changes within football organizations and analyze dismissals from the top European leagues. To account for the mean reversion of performance, we create a control group of non-dismissals using the nearest neighbor approach. To account for boards’ misperceptions, we differentiate between dismissals and non-dismissals that occur either due to poor playing performance on the pitch or due to a sequence of bad luck, which is measured using "expected goals". We find that dismissals after poor playing performance on the pitch increase subsequent performance, while dis-missals after a series of bad luck do not. Our results have important implications regarding the design of future turnover studies and the costs of boards’ ineffective turnover decisions. |
| Keywords: | football, managerial turnover, performance, football |
| JEL: | J44 L83 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:zrh:wpaper:380&r=all |
| By: | Prasanna Tambe; Xuan Ye; Peter Cappelli |
| Abstract: | We test the hypothesis that IT workers accept a compensating differential to work with emerging IT systems, and that employers that invest in these systems can, in turn, capture greater value from the wages they pay. We show that much of the utility IT workers derive from these systems is from skills acquired on the job. This is principally true for younger workers at employers where skill development is encouraged, and the effects are stronger in thicker markets where workers with newer skills have more outside options. An analysis of the text in online employer reviews supports the notion that IT workers value access to interesting IT systems above most other employer attributes. These findings are important because first, they provide evidence of how worker preferences can influence corporate IT investment decisions; second, because they shed light on factors influencing IT skill development; and third, because they point to a potentially important explanation for returns from IT investments. |
| JEL: | J24 J33 J41 L86 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25552&r=all |