This chapter surveys recent advances in personnel economics. We begin by presenting evidence showing substantial and persistent productivity variation among workers in the same roles. We discuss new research on incentives and compensation; hiring practices; the influence of managers and peers; and time use, technology, and training. We emphasize two main themes. First, we seek to illustrate the interplay between these topics and productivity differences between people and work units. Second, we argue that personnel economics has benefited from exploration, which we think of as the willingness to use new data and methods to shed light on existing questions and to raise new ones. As many personnel studies use data from individual firms, we discuss external validity and provide concrete guidance on how to improve discussions of the generalizability of findings from specific contexts.
Authors
- Acknowledgements & Disclosure
- Preliminary chapter in preparation for the Handbook of Labor Economics. We are extremely grateful to Kathryn Shaw for guidance, insights, and immense contributions to this handbook chapter, as well as her mentorship to us and many personnel economists. We are also incredibly grateful to Eddie Lazear for his mentorship, insights, and shaping of the field. We also thank Alan Benson, Kevin Bryan, Christian Dustmann, Guido Friebel, Peter Kuhn, Fabian Lange, Thomas Lemieux, and Paul Oyer for helpful comments. We thank Cameron Greene, Shira Aronson, Jessica Arp, and Kazuma Wells for excellent research assistance. Comments are very welcome. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- DOI
- https://doi.org/10.3386/w32849
- Pages
- 102
- Published in
- United States of America
Table of Contents
- Introduction 3
- Background and Stylized Facts 8
- Incentives, Compensation, and Labor Markets 13
- Performance pay 15
- Sorting and effort responses 15
- Behavioral models and non-monetary motivation 21
- Incentives for teams and innovators 26
- Pay levels, goal setting, career incentives 29
- Pay levels 30
- Subjective evaluation, career concerns, and employer learning 31
- External markets and firms' incentive responses 35
- How do firms set compensation and goals/standards in practice? 39
- Core takeaways 40
- Open questions about incentives 40
- Hiring 41
- Networks and information 41
- How do technology and other procedures influence hiring? 46
- How do hiring practices affect disadvantaged workers? 49
- How do workers decide on firms and what do workers know about firms? 52
- Open questions about hiring 54
- Managers, Peers, and Teams 55
- Managers 55
- Do managers matter? 55
- Which manager traits matter? 57
- How do managers matter? 59
- Additional questions about managers 61
- Peers and Teams 62
- Knowledge spillovers 63
- What limits knowledge spillovers? 65
- Coordination 68
- Peer pressure 68
- Extending research designs and open questions about peers 69
- Team Production and Effective Teams 70
- Rationales for team production 70
- Costs of team production 71
- What makes teams effective 72
- Time Use, Technology at Work, and Training 72
- Time use 73
- Technology at work 74
- Training 77
- Three Big Challenges and Opportunities in Personnel: External Validity, Scaling, and General Equilibrium 80
- External Validity 80
- Scaling a Treatment 84
- General Equilibrium Effects 85
- Conclusion 86
