Quarterly Personnel Update-- 2021_12

[Peter Kuhn]

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

Please remember that:

• the site is searchable at any time for key and recent articles on any personnel topic
• all references are linked for easy access
• newcomers can sign up for email updates on the site

This quarter's new references are:  

What is Personnel Economics and Why is it Important?

 

Bloom, Nicholas, Scott W. Ohlmacher, Cristina J. Tello-Trillo, and Melanie Wallskog (2021) Pay, Productivity, and Management NBER working paper no. 29377.

This paper uses confidential U.S. Census matched employer-employee earnings data to show that firms’ management practices matter for both productivity and wages:  Firms with more structured management practices, and more-productive firms pay their workers more at every level of the organization, and especially at higher levels.

The Principal-Agent Problem

 

1-4:  The Basic Principal-Agent Problem

 

Is it Crazy to Sell the Job to the Worker? 

Weaver, Jeffrey (2021) Jobs for Sale: Corruption and Misallocation in Hiring   American Economic Review, 111(10):3093-3122.

This paper studies the consequences of corrupt hiring in a health bureaucracy in the rural area of a large developing country. Hires pay bribes averaging 17 months of salary, but contrary to conventional wisdom, their observable quality is not necessarily lower than the merit-based hires that would likely have occurred instead:  it depends on whether abler applicants have greater or lower ability to pay bribes.  In this context, wealthier applicants were usually more productive workers, so bribes led to relatively good performance of hires.

 

5.2-5.4: The Risk-Incentives Tradeoff

 

Dohmen, Thomas, Arjan Non and Tom Stolp 2021 Reference Points and the Tradeoff between Risk and Incentives IZA discussion paper no. 14835

Consistent with the standard model of risk-incentives tradeoffs, the authors show that more risk-averse agents choose contracts with lower piece rates (and higher fixed pay) than other agents in a laboratory experiment.  Contrary to those predictions, however, they also find that low-productivity risk averse workers choose higher piece rates when the riskiness of the environment increases.  Using a second experiment, the authors show that this is explained by reference points:  low-productivity subjects tend to have reference points that are high relative to their expected earnings, inducing them to behave in a risk-seeking way.

6. Optimal Monitoring

 

Mohanan, Manoj, Katherine Donato, Grant Miller, Yulya Truskinovsky and Marcos Vera-Hernández   Different Strokes for Different Folks? Experimental Evidence on the Effectiveness of Input and Output Incentive Contracts for Health Care Providers with Varying Skills   American Economic Journal: Applied Economics, 13(4):34-69.

 

Using an experiment in Indian maternity care, the authors compare the performance of incentive contracts that reward the agents’ outputs versus their inputs.  They find that both contract types achieve comparable reductions in postpartum hemorrhage rates, but the output-based contracts cost the employer more money. 

 

 

Evidence on Employee Motivation

 

8. Safelite and Other Incentives Success Stories

 

Bandiera, Oriana Greg Fischer, Andrea Prat and Erina Ytsma (2021) Do Women Respond Less to Performance Pay? Building Evidence from Multiple Experiments  American Economic Review: Insights, 3(4):435-54.

If women respond less to financial incentives than men, performance pay will widen the gender earnings gap.  Combining data from a number of existing studies, the authors find men and women respond equally to performance pay, and that performance pay increases output by 0.36 standard deviations on average.

 

9.2 Intrinsic, Symbolic and Image Motivation

 

Bandiera, Oriana, Michael Carlos Best, Adnan Qadir Khan, and Andrea Prat 2021 “The Allocation of Authority in Organizations: A Field Experiment with Bureaucrats” Quarterly Journal of Economics, Volume 136, Issue 4, November 2021, Pages 2195–2242.  

The authors study of the allocation of authority between frontline procurement officers and their monitors affects performance in Punjab, Pakistan.  When the authors experimentally shifted authority down the hierarchy, from monitors to procurement officers, performance improved by 9 percent, consistent with a view that autonomy, but not incentives, is correlated with performance in bureaucracies. Incentives for monitors also worked, but only when the monitors do not behave in a corrupt fashion by delaying their approval of the officers’ actions. 

 

Does the mission matter?

Hedblomy, Daniel, Brent R. Hickmanz, and John A. List (2021) Toward an Understanding of Corporate Social Responsibility: Theory and Field Experimental Evidence NBER working paper no. 26222

If workers derive utility from doing a job that contributes to a  goal workers support, firms that advertise corporate social responsibility (CSR) activities could benefit financially by (a) attracting better workers and (b) motivating their existing workers more.  The authors create their own firm and designed an experiment to measure the effects of announcing their CSR commitment on both the selection and motivation of their employees.   When their firm advertised its CSR pursuits during employee recruitment, it attracted substantially more applicants, and the overall applicant pool was more productive. These increases in applicant quality were comparable to the impacts of a 36% wage increase.  Re-allocating existing employees from regular to CSR-related activities also increased their job performance substantially. 

 

10.1-10.3:  Gift Exchange and Reciprocity

 

Krueger, Miriam and Guido Friebel. 2021. A Pay Change and Its Long-term Consequences. Journal of Labor Economics, forthcoming.

In a professional services firm, top management unexpectedly adjusted the pay scheme of consultants in some divisions by raising fixed wages but reducing bonuses.  This caused a reduction in pay for the more productive workers and an increase for the low performers.  As a result, workers’ outputs and inputs decreased by 30%, and attrition and absenteeism increased, mostly among the workers who were hurt by the pay change. The authors argue that much of the reduction in effort was due to persistent negative reciprocity among the group that was harmed, not a response to declining marginal incentives.

 

10.7 Fairness Among Workers

 

Hazell, Jonathon, Christina Patterson Heather Sarsons,and Bledi Taska (2021). “National Wage Setting” unpublished paper, London School of Economics

Using data from large firms that operate in many different parts of the U.S., the authors show that 30-40% of posted wages for a given job within a firm are identical across all the company’s locations, despite dramatic differences in the cost of living and local wage levels.  Using a survey, the authors argue that these firms adopt national wage setting policies at least in part because their workers care about nominal, rather than real, wage comparisons.

Selection

 

17:  Setting Pay:  Monopsony Models

 

Gibson, Matthew. 2021 Employer Market Power in Silicon Valley IZA discussion paper no. 14843

This paper studies no-poach agreements through which Silicon Valley technology companies agreed not to compete for each other’s workers. Using Glassdoor data from before and after a US Department of Justice investigation, the authors estimate that a typical non-compete agreement cost workers approximately 2.5 percent of annual salary. Stock bonuses and ratings of job satisfaction were also negatively affected.

 

Can wage increases pay for themselves?

Hedblomy, Daniel, Brent R. Hickmanz, and John A. List (2021)  Toward an Understanding of Corporate Social Responsibility: Theory and Field Experimental Evidence NBER working paper no. 26222

As part of their study of corporate CSR activities’ effects on employee recruitment and performance, the authors also exogenously varied the wages advertised when recruiting workers for their company. When their firm recruited workers with a $15/hr wage offer (as compared to a lower offer of $11/hr), its production costs may actually have decreased, due to selection of individuals who are more productive and produce higher quality work requiring fewer costly quality-control measures.

 

18:  Setting Pay:  Efficiency Wages

 

Dahl, Gordon and Matthew M. Knepper. 2021 “Why is Workplace Sexual Harassment Underreported? The Value of Unemployment Amid the Threat of Retaliation” NBER working paper no. 29248

 

The authors show that workers are more reluctant to report sexual harassment when their outside labor market opportunities deteriorate.  To measure ‘reluctance’, they use the mean quality of sexual harassment claims:  if workers are very reluctant to claim, they will only file claims that are of the highest quality. When there are few jobs in the local labor market, workers accept lower levels of harassment without reporting them.  Thus, in addition to working harder, workers may also accept worse working conditions, including more sexual harassment, when their outside earnings opportunities deteriorate.

 

 

19: Training

 

Team-Specific Human Capital

 

Chen, Yiqun Team-Specific Human Capital and Team Performance: Evidence from Doctors American Economic Review, 111(12):3923-62.

 

In addition to general human capital, economists have demonstrated the importance of firm-specific, industry-specific, and occupation-specific human capital (i.e. skills that are accumulated with experience in a given firm, industry and occupation, and that aren’t portable to other firms, industries and occupations).  In workplaces, another potential type of human capital is team-specific.  Using administrative Medicare claims for two heart procedures, this paper shows that two-doctor teams (consisting of proceduralist and one specialist) who work together for a longer period of time become more productive; these increases in productivity are not portable if the doctors move to new teams. In this context, these increases in team-specific human capital take the form of substantial reduction in patient mortality.

 

Teams

 

27.2:  Skill Diversity, Information Sharing, and Team Performance

 

 

Chen, Yiqun Team-Specific Human Capital and Team Performance: Evidence from Doctors American Economic Review, 111(12):3923-62.

 

What makes teams more productive? Using administrative Medicare claims for two heart procedures, the author shows that shared experience matters:  When the same two individuals work together for a longer period of time, their shared productivity increases more than when team composition changes over the same period of time. In this context, the increased productivity takes the form of substantial reductions in patient mortality.

 

 

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.