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on Human Capital and Human Resource Management |
| By: | Clemens, Marco (IAAEU, University of Trier); Sauermann, Jan (IFAU) |
| Abstract: | Performance pay has been shown to have important implications for worker and firm productivity. Although workers' skills may directly matter for the cost of effort to reach performance goals, surprisingly little is know about the heterogeneity in the effects of incentive pay across workers. In this study, we apply a dynamic difference-in-differences estimator to the introduction of a generous bonus pay program to study how salient performance thresholds affect incentivized and non-incentivized performance outcomes for low- and high-skilled workers. While we do find that individual incentive pay did not affect workers' performance on average, we show that this result conceals an underlying heterogeneity in the response to individual performance pay: individual performance pay has a significant effect on the performance of high-skilled workers but not for low-skilled workers. The findings can be rationalized with the idea that the costs of effort differ by workers' skill level. We also explore whether agents alter their overtime hours and find a negative effect, possibly avoiding negative consequences of longer working hours. |
| Keywords: | performance pay, incentives, productivity, skills, panel data |
| JEL: | M52 J33 C23 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17119 |
| By: | Fongoni, Marco (Aix Marseille University); Schaefer, Daniel (Johannes Kepler University Linz); Singleton, Carl (University of Stirling) |
| Abstract: | We investigate how the incompleteness of an employment contract - discretionary and non-contractible effort - can affect an employer's decision about cutting nominal wages. Using matched employer-employee payroll data from Great Britain, linked to a survey of managers, we find support for the main predictions of a stylised theoretical framework of wage determination: nominal cuts are at most half as likely when managers believe their employees have significant discretion over how they do their work, though the involvement of employees, via information sharing, reduces this correlation. We also describe how contract incompleteness and wage cuts vary across different jobs. These findings provide the first observational quantitative evidence that managerial beliefs about contractual incompleteness can account for their hesitancy over nominal wage cuts. This has long been conjectured by economists based on anecdotes, qualitative surveys, and laboratory and field experiments. |
| Keywords: | wage rigidity, employment contract, workplace relations, employer-employee data |
| JEL: | E24 E70 J31 J41 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17079 |
| By: | Azmat, Ghazala; Cuñat, Vicente; Henry, Emeric |
| Abstract: | Using a representative survey of U.S. lawyers, we document a sizeable gender gap in early partnership aspirations, which explains half of the later gender promotion gap. We further document that the correlation between aspirations and effort provides a “mechanical link” between aspirations and promotion. Early workplace experiences, such as harassment and demeaning comments, are linked to promotion aspirations. Moreover, early aspirations provide insight into eventual promotion outcomes that goes beyond what can be drawn only from expectations. Our study highlights that measuring aspirations and adapting the corporate culture that shapes them are key components for firms to improve workplace environments. |
| Keywords: | gender gaps; promotion; high-skilled professionals |
| JEL: | J16 J44 K40 M51 |
| Date: | 2024–05–24 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:120741 |
| By: | Amer, Abdelrahman (University of Toronto); Craig, Ashley C (University of Michigan); Van Effenterre, Clémentine (University of Toronto) |
| Abstract: | Subjective performance evaluation is an important part of hiring and promotion decisions. We combine experiments with administrative data to understand what drives gender bias in such evaluations in the technology industry. Our results highlight the role of personal interaction. Leveraging 60, 000 mock video interviews on a platform for software engineers, we find that average ratings for code quality and problem solving are 12 percent of a standard deviation lower for women than men. Half of these gaps remain unexplained when we control for automated measures of coding performance. To test for statistical and taste-based bias, we analyze two field experiments. Our first experiment shows that providing evaluators with automated performance measures does not reduce the gender gap. Our second experiment removed video interaction, and compared blind to non-blind evaluations. No gender gap is present in either case. These results rule out traditional economic models of discrimination. Instead, we show that gender gaps widen with extended personal interaction, and are larger for evaluators educated in regions where implicit association test scores are higher. |
| Keywords: | discrimination, gender, coding, experiment, information |
| JEL: | C93 D83 J16 J71 M51 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17077 |
| By: | Giacomo Calzolari; Leonardo Felli; Johannes Koenen; Giancarlo Spagnolo; Konrad O. Stahl |
| Abstract: | We investigate the role of mutual trust in long-term vertical relationships involving trades of complex goods. High complexity is associated with high contract incompleteness and hence the increased relevance of trust-based relational contracts. Contrary to expectations, we find that changes in trust do not impact the quality of highly complex objects. Instead, higher trust improves the quality of less complex objects. Even more surprisingly, trust is associated with more competi-tion in procurement, again for low tech objects. This complexity-based difference persists even when the same supplier provides both types of objects, suggesting relational contracting may be object-specific. These findings are derived from a comprehensive survey of buyers and critical suppliers in the German automotive industry. We explain these results with a relational contracting model, where the cost of switching suppliers is technology-specific and increases with object complexity, shifting bargaining power and altering the effects of trust on each party’s incentives. |
| Keywords: | relational contracts, complexity, bargaining power, trust, high-tech industries |
| JEL: | D86 L14 L62 O34 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11170 |
| By: | Anastasia Danilov (HU Berlin); Ju Yeong Hong (HU Berlin); Anja Schöttner (HU Berlin) |
| Abstract: | A significant portion of the workforce experiences what we term `unfriendly leadership, ' encompassing various forms of hostile behavior exhibited by managers. The motivations driving managers to adopt such behaviors are insufficiently understood. To explore this phenomenon, we conducted a laboratory experiment examining the relationship between managers' use of unfriendly leadership and labor market competition. We discern two labor market states: excess labor demand, where managers compete to hire workers, and excess labor supply, where workers compete to be hired. By perceiving unfriendly leadership as a performance-contingent punishment device inflicting discomfort on workers, we hypothesize that managers are less inclined to resort to unfriendly leadership when they compete to hire workers. We find that managers tend to engage in unfriendly leadership more frequently and intensely under excess labor supply, in comparison to excess labor demand. This trend is particularly pronounced among male participants. Additionally, workers display a decreased likelihood of accepting employment offers from more unfriendly managers and exert lower levels of effort when working under such managers, indicating that unfriendly leadership is costly. |
| Keywords: | leadership style; labor market competition; non-monetary incentives; |
| JEL: | L20 M14 M55 |
| Date: | 2024–07–08 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:507 |
| By: | Miklós Koren; Álmos Telegdy |
| Abstract: | Using a novel Hungarian dataset on firms and their Chief Executive Officers (CEOs), we estimate the impact of hiring expatriate CEOs. By examining foreign acquisitions where the new owner replaces the incumbent CEO with an expatriate or a local CEO, we address the selection into both acquisition and CEO hiring. Firms led by expatriate CEOs show 13 percent total factor productivity growth, 95 percent sales growth, and increase both exports and domestic sales. Hiring expatriate CEOs enhances firm performance in both international and domestic markets. Our findings suggest that expatriates have superior general management skills. |
| Keywords: | expatriate CEO, foreign acquisition, firm performance, Hungary |
| JEL: | F23 F61 L25 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11164 |