Personnel Economics Resources-- Quarterly Update, September 2020
Peter Kuhn
- the site is searchable at any time for key and recent articles on any personnel topic you may be working on
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The Principal-Agent Problem
5.5: Multi-task Principal-Agent Interactions
Acemoglu, Daron, Leopoldo Fergusson, James Robinson, Dario Romero and Juan F. Vargas. “The Perils of High-Powered Incentives: Evidence from Colombia's False Positives” American Economic Journal: Economic Policy 2020, 12(3): 1–43.
High-powered incentives for the Colombian military produced a perverse side effect known as “false positives” which misrepresented innocent civilians as guerillas and resulted in their deaths. This effect of strong incentives was strongest in municipalities with weaker judicial institutions and where a higher share of brigades were commanded by colonels, who have stronger career concerns than generals
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5.6: Nonlinear Incentives and Timing Gaming
Sliwka, Dirk. Bonuses and performance evaluations Individual bonuses do not always raise performance; it depends on the characteristics of the job IZA World of Labor, 2020.
A helpful, up-to-date overview of the literature on when bonuses are effective motivators.
Evidence on Employee Motivation
10.1-10.3: Gift Exchange and Reciprocity
Akerlof, Robert, Anik Ashraf, Rocco Macchiavello, and Atonu Rabbani (2020) Layoffs and Productivity at a Bangladeshi Sweater Factory. CESifo Working Paper No. 8492
A mass layoff in a large Bangladeshi sweater factory resulted in a large and persistent reduction in the productivity of surviving workers. Productivity declines were greatest for worker whose friends had been fired, and appear to involve deliberate shading of performance by workers in order to punish the factory’s management.
10.6 Trust and the Cost of Control (Does this or 10.5 include relational contracting, BFF)
Ederer, Florian and Frédéric Schneider, 2019. "The Persistent Power of Promises," Cowles Foundation Discussion Papers 2129R
Using a large-scale hybrid laboratory and online trust experiment this paper investigates how the passage of time affects trust, trustworthiness, and cooperation. Communication (predominantly through the use of promises) raises cooperation, trust, and trustworthiness by about 50 percent. This effect is not mitigated by the passage of time.
10.7 Fairness Among Workers
Ritter, Beth M. and Jim Fickes. 2020 Downstream Implications of Pay Transparency: A Study of Studies Journal of Total Rewards.
A recent employer survey indicates only limited employer adoption of pay transparency, but some interest in moving towards greater transparency.
Selection
14. Recruitment: Formal versus Informal? Broad versus Narrow?
Cullen, Zoe B. and Ricardo Perez-Truglia. 2020 The Old Boys' Club: Schmoozing and the Gender Gap NBER Working Paper No. 26530
Shows that using networks to make promotion decisions can disadvantage women. Using the rotation of managers within a large company, the authors show that employees’ social interactions with their managers can be advantageous for their careers and contribute to the gender pay gap. Male employees assigned to male managers were promoted faster in the following years than male employees assigned to female managers; female employees, on the contrary, had the same career progression regardless of their managers’ gender. These differences were not accompanied by any differences in effort or performance, and they explain a third of the gender gap in promotions at this firm. Much of the benefit male workers receive from male managers appears to be connected to socialization—specifically taking smoking breaks together.
15. Choosing from the Pool: Testing, Discretion, and Self-Selection
Abel, Martin, Rulof Burger and Patrizio Piraino. The Value of Reference Letters: Experimental Evidence from South Africa American Economic Journal: Applied Economics 2020, 12(3): 40–71
Using a resume audit study, the authors show that reference letters from former employers increase callbacks by 60 percent, and reduce the gender gap in callbacks. Letters are effective because they provide valuable information about workers' skills that employers use to select applicants of higher ability.
Li, Danielle, Lindsey R. Raymond, and Peter Bergman. 2020 Hiring as Exploration NBER working paper no. 27736.
To find the best workers over time, firms must balance “exploitation” (selecting from groups with proven track records) with “exploration” (selecting from under-represented groups to learn about quality). Modern hiring algorithms, however, are designed solely for exploitation. To improve on existing algorithms, the authors build a resume screening algorithm that values exploration by evaluating candidates according to their statistical upside potential. Using data from professional services recruiting within a Fortune 500 firm, they show that this approach improves the quality of candidates selected for an interview, while also increasing demographic diversity.
Schneider, Florian H., Fanny Brun, and Roberto A. Weber. Sorting and Wage Premiums in Immoral Work. CESifo Working Paper No. 8456, July 2020
Using a combination of methods, the authors investigate whether people who are least concerned with acting morally select into jobs generally perceived as immoral, and whether most peoples’ aversion to immoral work requires employers to pay higher wages in immoral activities. They note that sorting by “immoral” types into jobs that can cause harm may be detrimental for society.
16.2 Causes of Discrimination
Roussille, Nina, 2020 The Central Role of the Ask Gap in Gender Pay Inequality unpublished paper, UC Berkeley
The gender ask gap measures the extent to which women ask for lower salaries than comparable men. Using data from Hired.com –where candidates for engineering jobs must post an ask salary—Roussille finds that women ask for 3.3 percent lower salaries after adjusting for resume characteristics. This gap fully explains the 1.8 percent gender gap in final salaries received by women using the platform. However, both these gaps can be eliminated by providing workers with better, objective information about salaries in their field and location.
16.3 Effects of Discrimination
Li, Xuan. 2020 The Costs of Workplace Favoritism: Evidence from Promotions in Chinese High Schools. Unpublished paper, Hong Kong University of Science and Technology.
Li shows that favoritism exists in Chinese public high schools: teachers with hometown or college ties to the school principal are twice as likely to be promoted. Further, teachers who have observed such unfair promotions in their school in the past respond by reducing their value-added and quitting more frequently. These adverse spillover incentive effects reduced school-wide performance. Both favoritism and its negative consequences were reduced by a transparency reform that made principals’ promotion decisions more visible.
16.4 Reducing Bias in Employee Evaluation
Tommasini, Anthony. To Make Orchestras More Diverse, End Blind Auditions New York Times, July 18, 2020.
While blind auditions have dramatically raised women’s representation in top orchestras, they have had little or no effect on racial diversity. Arguing that the musicianship and technique of the top candidates are virtually indistinguishable, the author proposes that hiring should also place weight on qualities like talent as an educator, interest in unusual repertoire or willingness to program innovative chamber events as well as pure musicianship.
17: Setting Pay: Monopsony Models
Bassier, Ihsaan, Arindrajit Dube, and Suresh Naidu. 2020 Monopsony in Movers: The Elasticity of Labor Supply to Firm Wage Policies NBER working paper no. 27755
The authors estimate workers’ separation elasticity using matched Oregon employer-employee data. Their estimates imply a firm-level labor supply elasticity of around 4. They conclude that monopsonistic competition is pervasive, and largely independent of forces (like employer concentration) driving classical monopsony
Tournaments
22.4: Ability Differences in Multistage Contests and Promotion Ladders (includes Selection Tournaments)
Deutscher, Christian, Marc Gürtler, Oliver Gürtler, Jed DeVaro, Firm choice and career success - theory and evidence, European Economic Review, Volume 127, 2020.
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The authors investigate how the decision of workers to join a specific type of firm affects their future career opportunities. Workers can either join a highly competitive firm (big pond) or a less competitive one (small pond). In a big pond, it is more difficult to advance, but the potential rewards are higher. The authors’ model predicts that only workers who are confident in their ability join big ponds, implying that the average abilities of new entrants are higher in big ponds than in small ponds. Data from professional soccer supports all the implications from our theoretical model.
Teams
25: Team Production in Practice
Charness, Gary and Yan Chen. Social Identity, Group Behavior, and Teams Annual Review of Economics Vol. 12:691-713 (August 2020)
While strong social identities can lead to conflict and violence, the authors review the literature on how positive identities and pride about one's social identity to be reinforced for the greater good. Recent work suggests that some forms of team competition can induce greater effort, which can be applied to areas such as microlending, charitable giving, and organization of the gig economy.
27.2: Skill Diversity, Information Sharing, and Team Performance
Schlangenotto, Darius, Wendelin Schnedler, and Radovan Vadovic. Against All Odds: Tentative Steps Toward Efficient Information Sharing in Groups. IZA DP No. 13547
The authors use a classroom environment to show that information sharing is poor in large, unstructured groups because it is privately optimal for all participants –both experts and non-experts-- to contribute their bits of information. Changing the environment to allow people to talk to their neighbors reduces noise and information quality by dramatically increasing the number of people who withhold their information.
Hoffman, Mitchell and Steven Tadelis. People Management Skills, Employee Attrition, and Manager Rewards: An Empirical Analysis Journal of Political Economy, forthcoming.
The authors study how a manager’s people management skills affect their employees. Using personnel data from a large, high-tech firm, they show that survey-measured people management skills strongly reduce employee turnover. Better people managers themselves receive higher subjective performance ratings, higher promotion rates, and larger salary increases
Sarsons, Heather, Klarita Gërxhani, Ernesto Reuben, and Arthur Schram Gender Differences in Recognition for Group Work. Journal of Political Economy, forthcoming.
The authors study who gets credit for group work using co-authorship patterns and tenure decisions among academic economists. Conditional on productivity and other observables, men are tenured similarly regardless of whether they coauthor or solo-author. Women, however, are less likely to receive tenure the more they coauthor. These results are confirmed in experiments and suggest that gender and stereotypes influence credit attribution for group work.
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.