Personnel Economics Resources-- Quarterly Update, December 2019

[Peter Kuhn]

During the past three months, the following new references have been added to the Personnel Economics Resources website:  

Evidence on Employee Motivation

 

Reciprocity:

Bruhin, Adrian, Ernst Fehr, and Daniel Schunk. “The Many Faces of Human Sociality: Uncovering the Distribution and Stability of Social Preferences” Journal of the European Economic Association, Volume 17, Issue 4, August 2019, Pages 1025–1069.  

A detailed experimental study of Swiss university students shows that other-regarding preferences are the rule, not the exception.  Three broad types of individuals are identified, all of whom value others’ payoffs more when they are ahead than when they are behind others. “Strong altruists” are moderately reciprocal and put positive value on others even when behind.  “Moderate altruists” display no reciprocity and place positive, but less weight on others’ payoffs.  “Behindness –averse” types put a large negative weight on others’ payoffs when behind and are selfish otherwise.   The purely selfish model of “rational economic man” does not emerge as a useful model of behavior for any group of subjects. 

Loss Aversion:

Bulte, Erwin,  John A. List, and Daan Van Soest. 2019 Toward an Understanding of the Welfare Effects of Nudges: Evidence from a Field Experiment in Uganda  NBER working paper no. 26286

Conducts a field experiment in Uganda that compares output levels across 1000 workers over similar tasks and incentives, framed as either losses or gains.   The authors find that loss aversion can be leveraged to increase the productivity of labor.  The estimated welfare costs of using the loss contract are quite modest, perhaps because workers view it as a (soft) commitment device. 

Fairness Between Workers:

Almås, Ingvild & Cappelen, Alexander & Tungodden, Bertil. (2019). “Cutthroat Capitalism versus Cuddly Socialism: Are Americans MoreMeritocratic and Efficiency-Seeking than Scandinavians?”  Journal of Political Economy, forthcoming.

Spectators in the US and Norway had the opportunity to redistribute pay from high- to low-paid workers (on MTurk) when (a) the pay gap was randomly assigned, versus (b) the pay gap was due to a productivity difference. When the pay gap was due to luck, 80% of Norwegians chose to completely eliminate it; only 50% of Americans did this.  When the pay gap was due to performance, 35% of Norwegians still chose to redistribute completely; only 10% of Americans did this.  Thus,  national culture seems to affect peoples’ perceptions of fairness in compensation:  Americans are much less egalitarian, and much less averse to rewarding luck than Norwegians.   In a project called “Fairness Across the World” The authors are extending this study to 60 countries, with 65,000 spectator workers.

Selection

 

For "Choosing Qualifications"-- An example of negative productivity interactions between workers:

Miller, Conrad, Jennifer Peck, and Mehmet Seek.  “Integration Costs and Missing Women in Firms” unpublished paper, UC Berkeley. August 2019

In Saudi Arabia and some other countries it is costly for a firm to employ both men and women because social norms prohibit interaction between unrelated men and women.  (Employing both genders in the same location requires configuring the workspace to segregate the genders.)  In this environment, only large firms will employ both genders, and many smaller firms will tend to be male-only.  Social norms against between-group interaction like these are examples of (a) “antagonistic inputs” in the production process (Section 12.2) and (b) employee-based taste discrimination (Section 16.2). 

 

Referrals:

Barr, Tavis, Raicho Bojilov and Lalith Munasinghe, "Referrals and Search Efficiency: Who Learns What and When?," Journal of Labor Economics 37, no. 4 (October 2019): 1267-1300.

 

Using data from a call center, the authors show that referrals help employers attract applicants of superior performance.  However, performance differences between referred and nonreferred workers diminish with tenure through selective turnover (less-productive workers are less likely to stay with the firm).  Thus, the main advantage of referred applicants is that they have been pre-screened for performance-relevant characteristics before they start work.

 

Promotions from within:

Benson, Alan Danielle Li, and Kelly Shue. “Promotions and the Peter Principle” The Quarterly Journal of Economics, Volume 134, Issue 4, November 2019, Pages 2085–2134.

The best worker is not always the best candidate for manager. In these cases, do firms promote the best potential manager or the best worker in their current job?  Using microdata on the performance of sales workers at 131 firms, the authors find evidence consistent with the Peter Principle, which proposes that firms prioritize current job performance in promotion decisions at the expense of indicators of managerial potential.  The authors estimate that this practice is quite costly to firms, and conclude that either (a) firms are making inefficient promotion decisions or (b) firms place a high priority on using promotions to as a financial reward for good work performance. 

 

Barfort, Sebastian, Nikolaj A. Harmon, Frederik Hjorth, and Asmus Leth Olsen. 2019. "Sustaining Honesty in Public Service: The Role of Selection." American Economic Journal: Economic Policy, 11 (4): 96-123.

Which types of workers self-select into work environments where financial performance incentives are weak?  In countries like Denmark where corruption is low, people who are more honest are much more likely to self-select into public sector jobs.  In Denmark, dishonest individuals care more about money and self-select out of public service into higher-paying private sector jobs.  This pattern differs sharply from existing findings from more corrupt settings.  In Denmark, it suggests that raising public sector wages could actually backfire—by attracting more dishonest candidates into public service.

 

 

Discrimination

Ajunwa, Ifeoma. “Beware of Automated Hiring” New York Times, October 8. 2019. 

The author discusses a number of pitfalls associated with It algorithmically-based hiring, and argue that it could accentuate, rather than eliminate discrimination in the hiring process. 

 

Kessler, Judd B.,  Corinne Low and Colin D. Sullivan “Incentivized Resume Rating: Eliciting Employer Preferences without Deception” American Economic Review 2019, 109(11): 3713–3744

Like resume audit studies, incentivized resume rating (IRR) is an experimental method for studying how employers choose successful candidates from a pool of applicants. In this new approach, experienced recruiters evaluate resumes they know are hypothetical; recruiters are motivated to do this honestly and carefully because their ratings will influence which real resumes they will eventually receive.  Key benefits of IRR, relative to audit studies, are that (a) they do not require deception of employers, and (b) they can elicit employers’ beliefs that the applicant will accept the offer, which is a confounding factor in audit studies.

 

 

Tournaments

 

Career ladders inside firms

Frederiksen, Anders, Lisa Blau Kahn, and Fabian Lange, "Supervisors and Performance Management Systems," forthcoming, Journal of Political Economy

The authors show that supervisors vary widely in the performance ratings they assign to subordinates of similar quality, and that these supervisor ratings differences impact their subordinates’ subsequent careers.  Supervisors’ average ratings differ for two reasons:  a) some supervisors are more lenient than others; and (b) some supervisors are better managers than others.  The authors’ estimate that firms are only partially aware of these differences in their managers’ rating practices. 

 

Gender and competition

Alan, Sule and Seda Ertac. Mitigating the Gender Gap in the Willingness to Compete: Evidence From a Randomized Field Experiment. Journal of the European Economic Association, Volume 17, Issue 4, August 2019, Pages 1147–1185.

Using a randomized experiment, the authors demonstrate that an educational intervention in primary schools can eliminate the gender gap in the willingness to compete.  The authors’ intervention aims to foster grit, a skill that is highly predictive of achievement.  The intervention promotes grit by exposing children to a worldview that emphasizes the role of effort in achievement and that encourages perseverance. 

 

 

Teams

 

Leadership:

Kosfeld, Michael, forthcoming “TheRole of Leaders in Inducing and Maintaining Cooperation: The CC Strategy” The Leadership Quarterly.

This paper summarizes recent findings from behavioral economics experiments in the lab and in the field on the role of leaders in human cooperation.  According to the author, successful leaders need to do three things.   First, they need to trust workers, in order not demotivate the motivated.  Second, leaders need to punish, in order to motivate the non-motivated.  Finally, leaders need to attract (and retain) motivated workers for their team. 

 

The volunteer’s dilemma:

Natanson, Hanna.  “Forget what you may have been told. New study says strangers step in to help 90 percent of the time” The Washington Post, September 6, 2019

A recent psychological study of surveillance camera footage from three countries shows that bystanders in actual public conflict aren’t apathetic after all.  In 90 percent of these situations, strangers intervened to help victims.  

 

Selection into Teams:

Cooper, David J., Krista Saral, and Marie Claire Villeval “Why Join a Team?”  IZA discussion paper no. 12587, September 2019.

The authors use lab experiments to study why high ability workers join revenue-sharing teams with less- able co-workers.  Is it because high-ability workers want to help their co-workers financially, or because they expect to realize some long-term financial gains from teaching their teammates?   When team members can communicate, the authors find that high ability workers’ decisions to join teams are driven by expected future financial gains from teaching, and not by their ‘pro-social’ preferences.  There are two main take-aways for managers:  First, team-based pay causes strong adverse selection:  talented workers tend to avoid team-based pay.  Second, adverse selection into teams decreases when high ability workers can reap the gains of mutual learning, which can be facilitated by work environments allow for stable team membership and foster teaching within teams.

 

Thanks for your attention!

Note:  The article descriptions in these updates are not copies of the authors’ abstracts.  While they may use text from those abstracts (and/or the article), they are my own summaries that (a) endeavor to be shorter than most abstracts, and (b) attempt to place the article in the broader context of personnel economics as a field.  I hope that you will find them helpful.