Behavioral and personnel economics

Articles in behavioral economics discuss the emotional and cognitive factors that influence the decisions of actors, in particular employers and employees. Personnel economics analyzes the internal organizational strategy of the firm and the human resource management practices chosen to pursue that strategy.

  • Incentivizing sleep?

    Insufficient sleep affects employment and productivity

    Joan Costa-Font, November 2022
    Spending time sleeping not only improves individuals’ well-being, but it can influence employment outcomes and productivity. Sleep can be disrupted by company schedules and deadlines, extended working times, and several individual and household decisions. Labor market regulation and corporate strategies should factor in the immediate effect of insufficient sleep on employee fatigue and cognitive performance, and the associated effects on employment disruption and productivity loss. Sleep can be influenced by “sleep friendly” employment regulations, technology nudges, monetary incentives, and subsidies for sleeping.
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  • The labor market consequences of impatience Updated

    Some people would be happier if they were required to stay in school longer or search harder for a job while unemployed

    Standard economic theory suggests that individuals know best how to make themselves happy. Thus, policies designed to encourage more forward-looking behaviors will only reduce people's happiness. Recently, however, economists have explored the role of impatience, especially difficulties with delaying gratification, in several important economic choices. There is strong evidence that some people have trouble following through on investments that best serve their long-term interests. These findings open the door to policies encouraging or requiring more patient behaviors, which would allow people to enjoy the eventual payoff from higher initial investment.
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  • Gender differences in risk attitudes Updated

    Belief in the existence of gender differences in risk attitudes is stronger than the evidence supporting them

    Antonio Filippin, October 2022
    Many experimental studies and surveys have shown that women consistently display more risk-averse behavior than men when confronted with decisions involving risk. These differences in risk preferences, when combined with gender differences in other behavioral traits, such as fondness for competition, have been used to explain important phenomena in labor and financial markets. Recent evidence has challenged this consensus, however, finding gender differences in risk attitudes to be smaller than previously thought and showing greater variation of results depending on the method used to measure risk aversion.
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  • Gender differences in corporate hierarchies Updated

    How and why do the careers of men and women differ? What policies could reduce the differences?

    Antti Kauhanen, October 2022
    The gender wage gap is largely due to men and women holding different kinds of jobs. This job segregation is partly driven by gender differences in careers in corporate hierarchies. Research has shown that the careers of men and women begin to diverge immediately upon entry into the labor market and that subsequent career progress exacerbates the divergence. This divergence of career progress explains a large part of the gender wage gap. Understanding how and why the careers of men and women differ is necessary to design effective policies that can reduce the gender differences in hierarchies.
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  • Digital leadership: Motivating online workers

    Which leadership techniques and tools should digital leaders use to communicate effectively with remote teams and gig workers?

    Petra Nieken, September 2022
    Remote work and digital collaborations are prevalent in the business world and many employees use digital communication tools routinely in their jobs. Communication shifts from face-to-face meetings to asynchronous formats using text, audio, or video messages. This shift leads to a reduction of information and signals leaders can send and receive. Do classical leadership and communication techniques such as transformational or charismatic leadership signaling still work in those online settings or do leaders have to rely on transactional leadership techniques such as contingent reward and punishment tools in the remote setting?
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  • How is new technology changing job design? Updated

    Machines’ ability to perform cognitive, physical, and social tasks is advancing, dramatically changing jobs and labor markets

    The IT revolution has had dramatic effects on jobs and the labor market. Many routine manual and cognitive tasks have been automated, replacing workers. By contrast, new technologies complement and create new non-routine cognitive and social tasks, making work in such tasks more productive, and creating new jobs. This has polarized labor markets: while low-skill jobs stagnated, there are fewer and lower-paid jobs for middle-skill workers, and higher pay for high-skill workers, increasing wage inequality. Advances in AI may accelerate computers’ ability to perform cognitive tasks, heightening concerns about future automation of even high-skill jobs.
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  • Does employee ownership improve performance? Updated

    Employee ownership generally increases firm performance and worker outcomes

    Douglas Kruse, May 2022
    Employee ownership has attracted growing attention for its potential to improve economic outcomes for companies, workers, and the economy in general, and help reduce inequality. Over 100 studies across many countries indicate that employee ownership is generally linked to better productivity, pay, job stability, and firm survival—though the effects are dispersed and causation is difficult to firmly establish. Free-riding often appears to be overcome by worker co-monitoring and reciprocity. Financial risk is an important concern but is generally minimized by higher pay and job stability among employee owners.
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  • Presenteeism at the workplace

    Working when sick is a widespread phenomenon with serious consequences for workers, firms, and society

    Claus Schnabel, May 2022
    Many workers admit that at times they show up for work even though they feel sick. This behavior, termed “presenteeism,” is puzzling since most workers do not incur financial losses when staying home sick. The various reasons behind presenteeism are person-related (e.g. individuals’ health or job attitude) or work-related (e.g. job demands and constraints on absence from work). Working when sick can have positive and negative consequences for workers’ performance and health, but it also affects co-workers’ well-being and firms’ productivity. There are various strategies as to how firms can address presenteeism.
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  • Gross domestic product: Are other measures needed? Updated

    GDP summarizes only one aspect of a country’s condition; other measures in addition to GDP would be valuable

    Barbara M. Fraumeni, April 2022
    Gross domestic product (GDP) is the key indicator of the health of an economy and can be easily compared across countries. But it has limitations. GDP tells what is going on today, but does not inform about sustainability of growth. The majority of time is spent in home production, yet the value of this time is not included in GDP. GDP does not measure happiness, so residents can be dissatisfied even when GDP is rising. In addition, GDP does not consider environmental factors, reflect what individuals do outside paid employment, or even measure the current or future potential human capital of a country. Hence, complementary measures may help to show a more comprehensive picture of an economy.
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  • Performance-related pay and productivity Updated

    Do performance-related pay and financial participation schemes have an effect on firms’ performance?

    A growing number of firms offer compensation packages that link pay to performance. The aim is to motivate workers to be more efficient while also increasing their attachment to the company, thereby reducing turnover and absenteeism. The effects of performance-related pay on productivity depend on the scheme type and design, with individual incentives showing the largest effect. Governments often offer tax breaks and financial incentives to promote performance-related pay, though their desirability has been questioned due to large deadweight losses involved. The diffusion of remote work will increase the relevance of performance-related pay.
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