Discussion Paper No. 412
August 5, 2023
Employee Performance and Mental Well-Being: The Mitigating Effects of Transformational Leadership during Crisis
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Abstract:
The positive role of transformational leadership on productivity and mental wellbeing has long been established. Transformational leadership behavior may be particularly suited to navigate times of crisis which are characterized by high levels of complexity and uncertainty. We exploit quasi-random assignment of employees to managers and study the role of frontline managers’ leadership styles on employees’ performance, work style, and mental well-being in times of crisis. Using longitudinal administrative data and panel survey data from before and during the Covid-19 pandemic, we find that frontline managers who were perceived as having a more transformational leadership style before the onset of the pandemic, lead employees to better performance and mental well-being during the pandemic.
Keywords:
leadership; frontline managers; labor-management relations; organizational behavior;
JEL-Classification:
M54; M12; J53;
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Discussion Paper No. 401
June 16, 2023
The Lifecycle of Affirmative Action Policies and Its Effect on Effort and Sabotage Behavior
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A main goal of affirmative action (AA) policies is to enable disadvantaged groups to compete with their privileged counterparts. Existing theoretical and empirical research documents that incorporating AA can result in both more egalitarian outcomes and higher exerted efforts. However, the direct behavioral effects of the introduction and removal of such policies are still under-researched. It is also unclear how specific AA policy instruments, for instance, head-start for a disadvantaged group or handicap for the privileged group, affect behavior. We examine these questions in a laboratory experiment in which individuals participate in a real-effort tournament and can sabotage each other. We find that AA does not necessarily result in higher effort. High performers that already experienced an existing AA-free tournament reduce their effort levels after the introduction of the AA policy. Additionally, we observe less sabotage under AA when the tournament started directly with the AA regime. The removal of AA policies, however, significantly intensifies sabotage. Finally, there are no overall systematic differences between handicap and head-start in terms of effort provision or sabotaging behavior.
Keywords:
affirmative action; sabotage; experiment; tournament; handicap; head-start;
JEL-Classification:
C72; C91; D63; D72;
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Discussion Paper No. 400
June 15, 2023
Responsibility-Shifting through Delegation: Evidence from China’s One-Child Policy
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We provide evidence on how responsibility-shifting through delegation occurred in China’s implementation of the one-child policy. We show that trust in local governments was reduced when they were the primary enforcer of the policy (1979–1990), while trust in neighbors was reduced when civilians were incentivized to report neighbors’ violations of the policy to the authorities (1991–2015). This effect was more pronounced among parents of a firstborn daughter, who were more likely to violate the policy due to the deep-rooted son preference. This study provides the first set of field evidence on the responsibility-shifting effect of delegation.
Keywords:
delegation; responsibility-shifting; One-Child policy;
JEL-Classification:
D02; D04; D90; J18;
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Discussion Paper No. 397
May 15, 2023
Management and Performance in the Public Sector: Evidence from German Municipalities
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Abstract:
We study management practices and performance in a representative sample of German municipalities, which provide the bulk of direct administrative services for citizens and firms in Germany. Surveyed municipalities differ substantially in their use of structured management practices, and this heterogeneity is also pronounced within all federal states, regional types, and population size brackets. Moreover, we document a systematic positive relationship between the degree of structured management and a diverse set of performance measures capturing municipalities' attractiveness for citizens and firms. Topic modelling (LDA) of survey responses suggests that the predominant management style is to use relatively little structured management.
Keywords:
management practices; public sector organizations; local government; municipal performance; state capacity; World Management Survey (WMS);
JEL-Classification:
D20; D73; H11; H73; R50;
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Discussion Paper No. 395
Pay Transparency in Organizations
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I study when a firm prefers to be transparent about pay using a simple multidimensional signaling model. Pay transparency within the firm means that a worker can learn about his own worker-firm match from another worker’s pay. This can either encourage or discourage workers—which affects retention—and so creates a trade-off for the firm when it commits to a level of transparency. The model pre- dicts that when few workers have a high worker-firm match, transparency is always preferred by the firm and becomes more favorable as the value of retaining these ‘star’ workers increases. This prediction is consistent with the firms in the field that choose to be internally transparent about pay. The model also predicts that transparency leads to pay compression, again consistent with evidence from the field.
Keywords:
pay transparency; bonus pay; multidimensional signaling; relative pay;
JEL-Classification:
D82; D86; J30; M52;
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Discussion Paper No. 394
Communicating Preferences to Improve Recommendations
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I study a cheap talk model between a buyer and a seller with two goods for sale. There is two-sided (independent) private information with sequential, two-way communication. In the first stage, the buyer communicates her private preferences to the seller. In the second stage, the seller communicates the quality of the goods to the buyer. When the buyer’s preference is about which attribute common to both goods she prefers, the seller strictly benefits from the buyer communicating her preferences. Whereas when the buyer’s preference is about which good she prefers, this is never the case.
Keywords:
cheap talk; strategic communication; product recommendations;
JEL-Classification:
D82; L15;
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Discussion Paper No. 393
May 9, 2023
Layoffs and Productivity at a Bangladeshi Sweater Factory
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Conflicts between management and workers are common and can have significant impacts on productivity. Combining ethnographic, survey and administrative records from a large Bangladeshi sweater factory, we study how workers responded to management’s decision to lay off about a quarter of the workers following a period of labor unrest. Our main finding is that the mass layoff resulted in a large and persistent reduction in the productivity of surviving workers. Moreover, it is specifically the firing of peers with whom workers likely had social connections - friends - that matters. Additional evidence on defect rates suggests a deliberate shading of performance by workers in order to punish the factory’s management.
Keywords:
layoffs; productivity; morale; relational contracts;
JEL-Classification:
J50; M50; O12;
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Discussion Paper No. 278
November 10, 2021
Leadership Styles and Labor-Market Conditions
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Why do some leaders use praise as a means to motivate workers, while other leaders use social punishment? This paper develops a simple economic model to examine how leadership styles depend on the prevailing labor-market conditions for workers. We show that the existence of a binding wage floor for workers (e.g., due to trade union wage bargaining, minimum-wage legislation, or limited-liability protection) can make it attractive for firms to hire a leader who makes use of social punishment. While the use of social punishments generally is socially inefficient, it lessens the need for high bonus pay, which allows the firm to extract rents from the worker. In contrast, firms hire leaders who provide praise to workers only if it is socially efficient to do so. Credible use of leadership styles requires either repeated interaction or a leader with the right social preferences. In a single-period setting, only moderately altruistic leaders use praise as a motivation tool, whereas only moderately spiteful leaders use social punishment. Lastly, we show that when the leaders' and workers' reservation utilities give rise to a bigger income gap between leaders and workers, attracting spiteful leaders becomes relatively less costly and unfriendly leadership becomes more prevalent.
Keywords:
leadership styles; incentives; motivation; social preferences; labor-market conditions; wage-setting;
JEL-Classification:
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Discussion Paper No. 252
November 9, 2021
Objective Rationality Foundations for (Dynamic) α-MEU
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We show how incorporating Gilboa, Maccheroni, Marinacci, and Schmeidler’s (2010) notion of objective rationality into the α-MEU model of choice under ambiguity (Hurwicz, 1951) can overcome several challenges faced by the baseline model without objective rationality. The decision-maker (DM) has a subjectively rational preference ≥^, which captures the complete ranking over acts the DM expresses when forced to make a choice; in addition, we endow the DM with a (possibly incomplete) objectively rational preference ≥*, which captures the rankings the DM deems uncontroversial. Under the objectively founded α-MEU model, ≥^ has an α-MEU representation and ≥* has a unanimity representation à la Bewley (2002), where both representations feature the same utility index and set of beliefs. While the axiomatic foundations of the baseline α-MEU model are still not fully understood, we provide a simple characterization of its objectively founded counterpart. Moreover, in contrast with the baseline model, the model parameters are uniquely identified. Finally, we provide axiomatic foundations for prior-by-prior Bayesian updating of the objectively founded α-MEU model, while we show that, for the baseline model, standard updating rules can be ill-defined.
Keywords:
ambiguity; α-MEU; objective rationality; updating;
JEL-Classification:
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Discussion Paper No. 226
From Friends to Foes: National Identity and Collaboration in Diverse Teams
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This project studies collaboration in highly skilled, nationally diverse teams. An unexpected international political conflict makes national diversity more salient among existing and potential team members. I exploit this natural experiment to quantify the role of social, identity-driven, costs for performance and formation of diverse teams. Using microdata from GitHub, the world’s largest hosting platform for software projects, I estimate the causal impacts of a political conflict that burst out between Russia and Ukraine in 2014. I find that the conflict strongly reduced online cooperation between Russian and Ukrainian programmers. The conflict lowered the likelihood that Ukrainian and Russian programmers work in the same team and led to the performance decline of existing joint projects. I provide evidence that the observed effects were not driven by economic considerations. Rather, the conflict activated national identities and shifted programmers’ taste for teammates and projects. My results highlight the role of identity-driven concerns that can distort existing and prevent future collaborations, otherwise profitable from an economic perspective.
Keywords:
teams; diversity; conflict; national identity; open source;
JEL-Classification: