Summary Articles
MADE BY: KRISTA LOK
COURSE: PERSONNEL ECONOMICS
COLLEGE: RIJKSUNIVERSITEIT GRONINGEN
STUDY: HUMAN RESOURCE MANAGEMENT
YOU CAN FIND THE ARTICLES THAT I HAVE SUMMARIZED BELOW (BOLD). THE
AUTHORS OF THE ARTICLES ARE LISTED UNDER THE TITLES.
Index
PERSONNEL ECONOMICS: THE ECONOMIST’S VIEW OF HUMAN RESOURCES................................................... 3
EDWARD P. LAZEAR AND KATHRYN L. SHAW (2007) ..................................................................................................... 3
WELL-BEING AND TRUST IN THE WORKPLACE .................................................................................................. 7
JOHN F. HELLIWELL • HAIFANG HUANG (2010) ............................................................................................................ 7
MOTIVATING EMPLOYEE-OWNERS IN ESOP FIRMS: HR POLICIES AND COMPANY PERFORMANCE .................. 9
D. KRUSE, R.FREEMAN, J. BLASI, R. BUCHELE, A. SCHARF, L. RODGERS AND C. MACKIN (2004) ........................................... 9
HOW DID EMPLOYEE OWNERSHIP FIRMS WEATHER THE LAST TWO RECESSIONS? EMPLOYEE OWNERSHIP
AND EMPLOYMENT STABILITY IN THE US: 1999-2008..................................................................................... 10
FIDAN ANA KURTULUS AND DOUG KRUSE(2011) ........................................................................................................ 10
WHAT MAKES WORKERS HAPPY? .................................................................................................................. 11
PETER H. VAN DER MEER AND RUDI WIELERS (2013) .................................................................................................. 11
HOW TO COMPETE: THE IMPACT OF WORKPLACE PRACTICES AND INFORMATION TECHNOLOGY ON
PRODUCTIVITY ............................................................................................................................................... 12
SANDRA E. BLACK AND LISA M. LYNCH (2001) ........................................................................................................... 12
GROUP DYNAMICS AND INTERGROUP RELATIONS ......................................................................................... 13
STRAUS (1955) .................................................................................................................................................... 13
TEAM INCENTIVES AND WORKER HETEROGENEITY: AN EMPIRICAL ANALYSIS OF THE IMPACT OF TEAMS ON
PRODUCTIVITY AND PARTICIPATION .............................................................................................................. 14
BARTON H. HAMILTON, JACK A. NICKERSON, AND HIDEO OWAN (2003) ........................................................................ 14
PERFORMANCE PAY AND PRODUCTIVITY ....................................................................................................... 16
BY EDWARD P. LAZEAR (2000) ........................................................................................................................... 16
THE QUARTERLY JOURNAL OF ECONOMICS.................................................................................................... 18
AKERLOF G.A. (1982)........................................................................................................................................... 18
A STUDY OF THE IMPACT OF PERFORMANCE PAY ON JOB SATISFACTION ...................................................... 22
W.D. MCCAUSLAND, K. POULIAKAS AND I. THEODOSSIOU (2005) ................................................................................ 22
RELATIONAL SIGNALLING AND THE RISE OF CEO COMPENSATION ‘…IT IS NOT JUST ABOUT MONEY, IT IS
ABOUT WHAT THE MONEY SAYS…' ................................................................................................................ 22
VEEN, VAN K. AND WITTEK, R. (2014)...................................................................................................................... 22
COMPENSATION BENCHMARKING, LEAPFROGS, AND THE SURGE IN EXECUTIVE PAY .................................... 26
THOMAS A. DIPRETE AND GREGORY M. EIRICH (2013) ............................................................................................... 26
1
,PERCEIVED UNFAIRNESS IN CEO COMPENSATION AND WORK MORALE ........................................................ 28
T. CORNELIßEN, O. HIMMLER, T. KOENIG (2011) ....................................................................................................... 28
THE EFFECT OF WAGE DISPERSION ON TEAM OUTCOME AND THE WAY TEAM OUTCOME IS PRODUCED ...... 29
EGON FRANCK & STEPHAN NÜESCH .......................................................................................................................... 29
TOURNAMENTS AND UNFAIR TREATMENT .................................................................................................... 31
GABRIELLA SJÖGREN LINDQUIST (2010) .................................................................................................................... 31
TOURNAMENTS AND OFFICE POLITICS: EVIDENCE FROM A REAL EFFORT EXPERIMENT ................................. 31
CARPENTER, JEFREY, METHEWS P.H., SCHIM, J. (2010) .............................................................................................. 31
HUMAN CAPITAL VS. SIGNALLING EXPLANATIONS OF WAGES ....................................................................... 33
ANDREW WEISS (1955) ......................................................................................................................................... 33
IS HIGH EMPLOYEE TURNOVER REALLY HARMFUL?........................................................................................ 34
GLEBBEEK & BAX, 2004 ......................................................................................................................................... 34
2
, Personnel Economics: The Economist’s View of Human Resources
Edward P. Lazear and Kathryn L. Shaw (2007)
HRM
Human resources management would often eschew generalization, arguing that each
situation is different.
Economist’s
The economist’s approach is the opposite. Rather than thinking of each human resources
event as separate and institutionally driven, economists place a premium on identifying the
underlying general principles, and on using specific institutional details to identify the causal
sources of the general principles.
Four primary building blocks from economics form the foundation of personnel economics:
1. First, personnel economics assumes that both the worker and the firm are rational
maximizing agents, seeking utility and profits.
2. Second, personnel economists assume that labor markets and product markets must
reach some price– quantity equilibrium, which provides discipline for our models.
3. Third, efficiency is a central concept of personnel economics.
4. Fourth, personnel economists emphasize the use of econometrics and experimental
design to identify underlying causal relationships.
We examine topics that have become fixtures of personnel economics and attempt to
demonstrate how the notions of maximization, equilibrium, efficiency, and econometric
modeling has enabled economists to further the understanding of human resources
management.
Promotion and Raises
In many large corporations with hierarchical management structures, wages show discrete
jumps between levels of the hierarchy, rather than continuous increases.
Tournament theory:
- Promotions are a relative gain. Individuals are promoted not on the basis of their
absolute performance, but on the basis of their relative position in the organization.
- Furthermore, the compensation at one level does not necessarily serve to motivate
individuals currently working at that level, but instead motivates all of those below
that level who strive to be promoted.
Notions tournament theory
- Tournament theory begins with the notion that prizes are fixed in advance. Winning that
salary depends on relative performance. Individuals are promoted not because they are
good, but because they are better than others within the relevant group.
- The larger the pay spread between promotions, the larger the incentive to put forth
effort.
- Pay structure must strike a balance between providing incentives for effort and reducing
the adverse consequences associated with this kind of industrial politics: Very large pay
spreads induce high effort, but they also create a work environment in the firm that is
3
MADE BY: KRISTA LOK
COURSE: PERSONNEL ECONOMICS
COLLEGE: RIJKSUNIVERSITEIT GRONINGEN
STUDY: HUMAN RESOURCE MANAGEMENT
YOU CAN FIND THE ARTICLES THAT I HAVE SUMMARIZED BELOW (BOLD). THE
AUTHORS OF THE ARTICLES ARE LISTED UNDER THE TITLES.
Index
PERSONNEL ECONOMICS: THE ECONOMIST’S VIEW OF HUMAN RESOURCES................................................... 3
EDWARD P. LAZEAR AND KATHRYN L. SHAW (2007) ..................................................................................................... 3
WELL-BEING AND TRUST IN THE WORKPLACE .................................................................................................. 7
JOHN F. HELLIWELL • HAIFANG HUANG (2010) ............................................................................................................ 7
MOTIVATING EMPLOYEE-OWNERS IN ESOP FIRMS: HR POLICIES AND COMPANY PERFORMANCE .................. 9
D. KRUSE, R.FREEMAN, J. BLASI, R. BUCHELE, A. SCHARF, L. RODGERS AND C. MACKIN (2004) ........................................... 9
HOW DID EMPLOYEE OWNERSHIP FIRMS WEATHER THE LAST TWO RECESSIONS? EMPLOYEE OWNERSHIP
AND EMPLOYMENT STABILITY IN THE US: 1999-2008..................................................................................... 10
FIDAN ANA KURTULUS AND DOUG KRUSE(2011) ........................................................................................................ 10
WHAT MAKES WORKERS HAPPY? .................................................................................................................. 11
PETER H. VAN DER MEER AND RUDI WIELERS (2013) .................................................................................................. 11
HOW TO COMPETE: THE IMPACT OF WORKPLACE PRACTICES AND INFORMATION TECHNOLOGY ON
PRODUCTIVITY ............................................................................................................................................... 12
SANDRA E. BLACK AND LISA M. LYNCH (2001) ........................................................................................................... 12
GROUP DYNAMICS AND INTERGROUP RELATIONS ......................................................................................... 13
STRAUS (1955) .................................................................................................................................................... 13
TEAM INCENTIVES AND WORKER HETEROGENEITY: AN EMPIRICAL ANALYSIS OF THE IMPACT OF TEAMS ON
PRODUCTIVITY AND PARTICIPATION .............................................................................................................. 14
BARTON H. HAMILTON, JACK A. NICKERSON, AND HIDEO OWAN (2003) ........................................................................ 14
PERFORMANCE PAY AND PRODUCTIVITY ....................................................................................................... 16
BY EDWARD P. LAZEAR (2000) ........................................................................................................................... 16
THE QUARTERLY JOURNAL OF ECONOMICS.................................................................................................... 18
AKERLOF G.A. (1982)........................................................................................................................................... 18
A STUDY OF THE IMPACT OF PERFORMANCE PAY ON JOB SATISFACTION ...................................................... 22
W.D. MCCAUSLAND, K. POULIAKAS AND I. THEODOSSIOU (2005) ................................................................................ 22
RELATIONAL SIGNALLING AND THE RISE OF CEO COMPENSATION ‘…IT IS NOT JUST ABOUT MONEY, IT IS
ABOUT WHAT THE MONEY SAYS…' ................................................................................................................ 22
VEEN, VAN K. AND WITTEK, R. (2014)...................................................................................................................... 22
COMPENSATION BENCHMARKING, LEAPFROGS, AND THE SURGE IN EXECUTIVE PAY .................................... 26
THOMAS A. DIPRETE AND GREGORY M. EIRICH (2013) ............................................................................................... 26
1
,PERCEIVED UNFAIRNESS IN CEO COMPENSATION AND WORK MORALE ........................................................ 28
T. CORNELIßEN, O. HIMMLER, T. KOENIG (2011) ....................................................................................................... 28
THE EFFECT OF WAGE DISPERSION ON TEAM OUTCOME AND THE WAY TEAM OUTCOME IS PRODUCED ...... 29
EGON FRANCK & STEPHAN NÜESCH .......................................................................................................................... 29
TOURNAMENTS AND UNFAIR TREATMENT .................................................................................................... 31
GABRIELLA SJÖGREN LINDQUIST (2010) .................................................................................................................... 31
TOURNAMENTS AND OFFICE POLITICS: EVIDENCE FROM A REAL EFFORT EXPERIMENT ................................. 31
CARPENTER, JEFREY, METHEWS P.H., SCHIM, J. (2010) .............................................................................................. 31
HUMAN CAPITAL VS. SIGNALLING EXPLANATIONS OF WAGES ....................................................................... 33
ANDREW WEISS (1955) ......................................................................................................................................... 33
IS HIGH EMPLOYEE TURNOVER REALLY HARMFUL?........................................................................................ 34
GLEBBEEK & BAX, 2004 ......................................................................................................................................... 34
2
, Personnel Economics: The Economist’s View of Human Resources
Edward P. Lazear and Kathryn L. Shaw (2007)
HRM
Human resources management would often eschew generalization, arguing that each
situation is different.
Economist’s
The economist’s approach is the opposite. Rather than thinking of each human resources
event as separate and institutionally driven, economists place a premium on identifying the
underlying general principles, and on using specific institutional details to identify the causal
sources of the general principles.
Four primary building blocks from economics form the foundation of personnel economics:
1. First, personnel economics assumes that both the worker and the firm are rational
maximizing agents, seeking utility and profits.
2. Second, personnel economists assume that labor markets and product markets must
reach some price– quantity equilibrium, which provides discipline for our models.
3. Third, efficiency is a central concept of personnel economics.
4. Fourth, personnel economists emphasize the use of econometrics and experimental
design to identify underlying causal relationships.
We examine topics that have become fixtures of personnel economics and attempt to
demonstrate how the notions of maximization, equilibrium, efficiency, and econometric
modeling has enabled economists to further the understanding of human resources
management.
Promotion and Raises
In many large corporations with hierarchical management structures, wages show discrete
jumps between levels of the hierarchy, rather than continuous increases.
Tournament theory:
- Promotions are a relative gain. Individuals are promoted not on the basis of their
absolute performance, but on the basis of their relative position in the organization.
- Furthermore, the compensation at one level does not necessarily serve to motivate
individuals currently working at that level, but instead motivates all of those below
that level who strive to be promoted.
Notions tournament theory
- Tournament theory begins with the notion that prizes are fixed in advance. Winning that
salary depends on relative performance. Individuals are promoted not because they are
good, but because they are better than others within the relevant group.
- The larger the pay spread between promotions, the larger the incentive to put forth
effort.
- Pay structure must strike a balance between providing incentives for effort and reducing
the adverse consequences associated with this kind of industrial politics: Very large pay
spreads induce high effort, but they also create a work environment in the firm that is
3
